5 min read
Recurring Revenue for small business
As a small business owner, you have more access to affordable technology than ever before. Recurring revenue is one of those exciting business models that many small business owners feel is out of reach for the little guy. The truth is, recurring revenue or cloud-managed services, are very much available to businesses of all size. Implementing the right technology to make a real difference to your customers needs to be your primary focus. Improving the customer experience will improve customer lifetime, and ultimately your bottom line.
One way you can improve your customer experience is make it easy for them to pay you.
When you break down your current business model, it all boils down to your customer. Being customer-centric is what sets apart the growing businesses from the stagnant ones. Growing businesses have a knack, indeed a passion, for delighting their customers at every turn and with every interaction. Delivering a stellar product or service is what you strive to do day in- day out.
Follow this article to discover what is, why you need, and how to implement recurring revenue.
What is recurring revenue?
Don’t be fooled by fads and buzz words. Recurring revenue is not a new concept. It’s about repeat customers, and simplifying your cash flow. So if you have repeat customers, why not make it easy for them to pay you on a repeat plan? If you sell a product, why not start servicing your product post-sale? For product businesses, this is the first place to look for recurring revenue options. For service-based models, break down your services into smaller, more manageable amounts of service and cost for your customers.
Why you need to implement recurring revenue
Cash flow is the number one issue facing small businesses. Forecasting cash flow in a small business is often a pipe dream. But it doesn’t have to be, and here’s why. Recurring revenue lets you enter the world of accurate cash flow forecasts. Committed Monthly Recurring Revenue is even better, but if you can’t get your customers to commit to a contract you can definitely help them commit to recurring payments they can cancel at any time. If you know what your cash flow forecast is, you can begin to plan for the future growth of your business.
How to implement recurring revenue in your business
Write down the common services or products that you deliver on a regular basis to the same customer, or set of customers. Then draw a table with two columns, one for your repeat customers and one for your most profitable customers. What are the key identifiers for each segment? Most people end up with 6 or 7 attributes in each column, with some common items on both sides. This is your sweet spot. If you offer your most common products or services to those customers that are both profitable and regular, you will grow your business.
The right payment solutions tools
When you begin to offer a recurring product or service at regular intervals, you need to focus on building and maintaining the relationship with your customers, without increasing your administration. You can setup recurring payments within your accounting platform, or in a stand-alone cloud based payments platform with minimal effort, and maximum return on your investment. Search for a platform that does direct debit as the core function, with multiple payment methods as backup. Many customers prefer to pay online, and prefer to avoid the hassle or embarrassment of paying late invoices. This is your number one sales tactic when you’re communicating your new pricing strategy to your customers. It’s all about making life easier for them, don’t forget.
Which recurring revenue model is right for your business?
This is almost exclusively decided by your business situation, your competitive landscape and your appetite for change. Talk to your customers, find out what their experience and expectation of subscriptions and pay-per-use has been in your industry. Do your research. And listen to what your customers are telling you. There’s no point offering a great new model if your customers don’t want it.
Investing in a recurring revenue model can improve customer loyalty, the customer experience and your bottom line. Multiple payment types , deployment models and access to legacy payment methods need to be high on your priority list as you break down your requirements and build your new competitive advantage. Act fast, act early, set your recurring revenue on autopilot so you can move on to your recurring customer relationships.