Guide to Creating Recurring Business Revenue Streams

Guide to Creating Recurring Business Revenue Streams

Reading Time: 6 minutes(Last Updated On: April 11, 2019)

When you set up your business you knew that it wouldn’t be smooth sailing – there’d be ups and downs, but you hoped that you could at least get yourself a steady baseline revenue, where you knew every month you’d have at least X amount of dollars to get you by.

Now you’re in business, you realize that this isn’t so easy to achieve. How do you get a recurring revenue?

What is recurring revenue?

First, what is monthly recurring revenue? Monthly recurring revenue is the portion of your business’s revenue that is very likely to continue into the future. It’s your ‘base-line’ so to speak. It’s predictable, it’s stable and it’s pretty much security in a jar.

How to create recurring revenue:

When creating a recurring revenue stream, you’re finding a way that you’re business can steadily function without you being the direct salesman and making things happen. But how? There are many ways to do this, but in this post, we’ll be focusing on one very effective way of creating a recurring payment revenue, which is – drum roll, please…

A subscription model

When you think of a subscription, what comes to mind?

Probably your daily newspaper delivered to your doorstep by the local paperboy, or maybe your monthly National Geographic magazine delivery.

Those are the origins of the subscription model.

Subscriptions then extended to household staples like milk and orange juice, and nowadays you can get almost anything on a subscription basis, even razor blades and q-tips!

Recurring revenue businesses include Amazon, which offers a ‘Subscribe & Save’ option whereby you can sign up to get automatic deliveries of your favorite items (or items that you generally repeat purchase) at a 15% discount.

According to data from a 2018 study from McKinsey & Company, 15% of online shoppers have signed up to one or more product subscriptions. This gives customers the option of subscribing to your product or service at a discount which is a great way to guarantee a recurring revenue stream!

Of course, you should still offer customers a one-time purchase option, but when the subscription model comes at a discounted price per product, customers will find this hard to resist.

Carry on reading to learn more about how subscriptions can help your business and customers.

What is a subscription?

A subscription is a sales arrangement whereby customers receive products or services at set intervals for a set price per interval. Often, each sale will be at a friendly and tempting discount.

If you start thinking inside the subscription box, you can really get creative with this, the options are literally endless.

Right now the subscription market is boom boom booming, growing by more than 100% a year over the last five years!

Even if you think your business isn’t the best fit for subscriptions, you might just be surprised. This model works for all types of online businesses, offline businesses, retailers and service providers in industries across the board.

For example, if you run a beauty parlor, you could offer customers the opportunity to subscribe to a monthly manicure at a discounted price if they sign up for yearly subscription billing or an indefinite subscription that they can cancel at any time.

Benefits of subscriptions

There are so many benefits of setting up a subscription billing option for both you and your customers.

Benefits for business owners

    • Predictable, recurring revenue
    • Increased customer loyalty
  • Opportunities to upsell or cross-sell

Benefits to customers

    • Discounts
    • Convenience
  • Cost-effective way of reducing bank charges or transaction fees

Popular types of subscriptions

As mentioned, you can really get creative with your subscriptions. These are some of the most popular variations:

Product subscriptions

The simplest and most common subscription type is to offer your product or service on a ‘Subscribe & Save’ basis. Your customer signs up, pays automatically at each interval and receives your product or service at a discount.

Simple and effective.

Subscription boxes

Subscription boxes were a huge trend in 2018.

What are they exactly and how does it work?

For a monthly fee, a customer will complete a quick survey about their specific preferences and will receive a box filled with surprise goodies to match their tastes every month.

This can work well for so many industries!

Recurring revenue business ideas

There are tonnes of recurring revenue business ideas out there!

Here’s one unique idea on the house. If you own a coffee shop, you could offer subscription boxes of coffee beans and other cafe-related goodies. Perhaps even a card that gives them 10 coffees a month at a discounted price?

At Become, we may be dedicated to finding the perfect unsecured business loan for business owners but we are also dedicated sweet tasters. Hear us out! We’ve subscribed to recurring revenue businesses such as Universal Yums – they send us a surprise box of snacks from a different country every single month. Then it’s every man for himself as we grab the goodies 🙂

Source: Become Offices – employees fighting over Universal Yums!

Other recurring revenue business ideas include:

    • Membership sites – perhaps you have an information providing website, where you can encourage users to sign up and use monthly subscription billing to see the information?
    • Physical product subscription – just like mentioned above
  • Service plans or retainers – for businesses offering a product or service that may need regular maintenance or renewal, offer packages where they pay on a monthly basis – this saves you from approaching customers every time they need help with something or more products. You could offer a subscription business model where there’s a 3-month package or even year-long, instead of quoting every time.

Club subscriptions

Wine of the Month club, Socks of the Month, anything of the month club can work.

Again, just be creative.

Make it seem exclusive.

Unlike product subscriptions, club subscriptions don’t work for every business, so first, research your customer base to figure out if they’d be interested in and willing to pay for this.

Gift subscriptions

No matter which type of subscription you offer, you can also present it as a great gift for friends and family.

Downside of subscriptions

We don’t live in a perfect world so, of course, there are downsides to selling subscriptions. We want to be real with you here and even though we feel that the benefits far outweigh the downsides, it’s up to you to be presented with the facts and make an informed decision.

1. Reduced profit margins

Because it’s often challenging to get customers to subscribe without an incentive, you’ll probably need to discount your product or service which will reduce your profits. If your product is something that your target market generally repurchases on a regular basis you could try to avoid offering a discount and instead emphasize the convenience and time savings of a subscription.

2. Ongoing management

Obviously, a subscription requires extra processes to manage these orders, however, this isn’t so much of a problem these days thanks to today’s Subscription Management Software, such as Salesforce and Zoho.

3. Not for every product or service

Even if you totally think out the box, you might still find that it’s just not a good fit for your business and customers.

Key takeaway

Just say after reading this, you’ve decided to further explore subscriptions, or even already made up your mind to go ahead. Great, but there’s still some more (important) ground to cover.

And this is it…

Make sure you make your customers aware of your new subscription model and educate them about how it benefits them. You could have the perfect subscription offering at a dream price, but it’s no good to you if your customers don’t know about it.

Which leads us to…

How to promote your subscription offering

Stand on your rooftop and shout it out to the world!

Fear of heights?

Fear not, you can just shout it out to the world through all of your marketing channels:

1. Online

    • Share on your business and personal social media
    • Create videos and add to your YouTube channel (there are some simple, inexpensive DIY video tools out there, such as Powtoon)
    • Blog about it
    • Add it as an option to your website
  • Blast out an email campaign about it

Check out our article Best Ways To Market Your New Business Online for marketing advice and tips from our very own Become marketing experts.

2. Instore

Promote your subscription offering in-store with flyers, magnets or other relevant promotional material.

How recurring revenue can help you get the best funding

One of the main ingredients that go into getting approved for business funding is to bring in a specific minimum monthly revenue. Having multiple customer subscriptions will make this easier for you because you’ll automatically be collecting revenue on an ongoing basis.

The perfect recipe for success!

Do you already offer subscriptions to your customers? Please share your subscription offer with us in the comments below.

Disclaimer: The information contained in this article is provided for informational purposes only, should not be construed as legal advice on any subject matter and should not be relied upon as such. The author accepts no responsibility for any consequences whatsoever arising from the use of such information.