Building a business that will stand the test of time requires smart moves that will enable you attract customers and investors alike. One of these smart moves is building a business with a good recurring revenue. From my own point of view, I see businesses with no recurring revenue as a risky asset that can be razed by the fire of future uncertainties.
The positive side of building a business with a good recurring revenue model, which we don’t see is based on the fact that this model can be fixed in all kind of business, it’s the job of you as an entrepreneur to go figure out how best to fix a recurring revenue model into your business.
Below are five reasons why you must build a business with recurring revenue;
Draws the attention of investors.
It has been said that businesses with a well structured recurring revenue model do attract investors like how ant is being attracted to sugar. It is common sense that made it so, put yourself in the shoes of those investors, if you have to choose between a business that customers will have to pay monthly or yearly to access their product or services or a business that depends on selling to customers once and will either have a repeat-buy customer or look for other customers before they make a sale.
I am very sure you will invest into the first business, well, that is simple logic. Investors tend to put their money into businesses with a recurring revenue.
2. Saves you a whole lot of stress.
Building a business with a recurring revenue in place will save you a whole lot of stress in the long run, starting from day one in most cases. This is due to the fact that your first customers will most likely stay with your business and even become your marketers if what you are offering is valuable and of high quality.
This is evident with most businesses with a recurring revenue like most telecommunication companies, domain registrars, then web hosting companies. Once you can offer quality and valuable product or services in your recurring revenue business model, you will save yourself the whole stress of trying to sell to new customers (though you will still be involved in marketing to get new sign-ups) and trying to get repeat-buy from older customers.
3. You can predict and project your income.
Another good reason for building a business with recurring revenue is based on the fact that you can predict your income for the next one year, you can also give your business five years income projection if you are able to set goals on the number of customers that will sign up with your business within that time frame.
For instance, you have a sport membership site where members are given sport betting tips for $40 monthly, the first you were able to get 10,000 members, that is $400,000 if you and you customers are able to pull out another 50,000 members within five years, your income projection for that five years should be around $2,000.000.00 in a worst case scenario.
4. You can easily add back-end product or services.
Most recurring revenue business model do have one thing in common, they have a database of their existing customers, with this, you can easily introduce a product or services relating to the niche you are doing business in to your existing customers and you will make sales comfortably without spending much money on advertising and marketing.
5. Your business soon turns into a system.
Another wonderful reason is that your recurring revenue business model soon turns into a system that will require little monitoring. Practically, your business will be on autopilot in no time as you can just hire or outsource the jobs of monitoring the activities that will make it grow.
All the above among many other positive reasons of building a business model with recurring revenue should spark off that creativity in you, so that you can come up with a good concept to either build your new business with a recurring revenue or integrate it into your existing business.