The recurring income model. It’s my hero.
What do I mean by recurring income business model?
One of the things that I look for with my business coaching clients is to find a way that they can charge the same clients a regular fee for ongoing work.
In business, cash flow is king. It rules your entire life like some feudal lord with control over his serfs.
I want my clients to rule their own lives and not have to worry about cash flow, so I’m always looking for a way that they can make sure that they’ve got regular money coming in.
That’s where the recurring income business model comes in.
The recurring income business model might mean repositioning the business so that it offers packages of work, rather than one-off projects. Or it might be the retainer model, where your client agrees to pay a regular fee to access a certain number of hours of your time or a bundle of services each month.
Alternatively, you offer a discount to the client if they book so many sessions over a full year, something like a “buy 12, get two free” offer.
Why would I give them a discount?
You’ll read elsewhere on the blog that I don’t approve of giving discounts. I see giving discounts as lazy marketing or what people do when they’re not so confident about what they’re offering.
But, one time that it is good to give a discount is where that brings in regular work, or makes your company look more like the recurring income business model.
It’s better to have regular work, and therefore monthly recurring revenue, then to maximise the amount of your billing. Your business will be more healthy if you’ve got 5K coming in every month, and you know that you’ve got 5K coming in on a monthly recurring basis. That’s better for you than getting 65k in February, and then nothing for the rest of the year.
That recurring income helps you plan and invest in the business, and it boosts your confidence.
Some examples of recurring income model businesses
90% of my business coaching work is on a recurring income model, and I’ve set this up on purpose because it makes me feel much more confident and healthy. Clients pay me a monthly set fee, and they get a package of services. Some clients just come along to meetings, and I never hear from them in between. Others phone and email me a couple of times a week or sometimes more.
Overall, this tends to even out, and I know after 18 years of being a business coach the average number of hours I spend supporting clients.
How the recurring income business model works for other businesses
A car mechanic might want to increase her monthly recurring revenue by offering quarterly tune-ups and servicing.
Most people only get their car sorted out if there is either a problem or if the MOT is due. I think most mechanics are missing a trick by not offering a quarterly or annual service to keep the car in tiptop shape.
The regular checkup would be better for the owners because any niggling little problems would be dealt with before they became big problems or potentially dangerous, plus the car would be running at its maximum potential.
Our mechanic might even include an upsell on the deal of a cleaning or valet service at the same time as the tuneup.
Recurring income business model for lawyers
Most lawyers are only called in when there’s a problem or a significant change.
Again, I think they’re missing a trick. A good lawyer would be forging a great relationship with her clients by having a monthly or quarterly meeting. Or maybe being a board adviser or non-executive director (NED) She could offer a legal perspective on the challenges their business faces. And she would be in a great position to sell in her one-off services of negotiating or checking contracts as they went along.
If I were a legal firm, I’d offer this at much less than my standard hourly rate to be able to establish a great ongoing relationship with my clients. The fee for the regular meetings would also give my firm some great recurring income.
What about the copywriters?
Copywriters are usually called in when somebody is re-writing their website, or they have a new brochure to write. When you have a new client you have the opportunity to suggest that as well as the new website; your clients will need content written every month. Plus someone to check the site and make sure that it’s all up to date and working correctly.
I’ve noticed that creatives, like copywriters and web designers, are less likely to build in recurring revenue streams like this. Which is crazy – wouldn’t it be much more fun to be a copywriter who does regular work for the same client? And wouldn’t you be able to add much more value to your clients business by keeping their tone of voice or brand on track, or making sure they are making the most of their website?
Don’t be tempted to walk away at the end of a project, and start hunting for the next one. By thinking more in terms of your company using the recurring income business model, you can provide a better service to your clients, increase cash flow, and have predictable revenue. What’s not to like?
And the bookkeepers?
If you run a bookkeeping business, you probably already have monthly recurring revenue because your clients need you every month. But maybe they also need something beyond just keeping their books up to date. Maybe they need a monthly report on the health of their business or the state of their investments.
Providing the monthly written report could be a very nice extra source of recurring income. And it sets you apart from other bookkeepers. A simple upsell like this could be your Purple Cow differentiator which gives you more clients than you can ever need.
How can your business change to the recurring income business model?
I think you get the idea – you need to transform your business if you’re not already getting regular fees from clients. And you might need some help to do just that.
My work is all about helping people with small businesses to build and develop bigger, stronger companies. It’s all about helping people to make more money, and have more fun.
How to get going with the recurring income business model
I go into a lot more detail about different ways to put the recurring income business model into practice in my Sweetspot Pricing book and resource pack. Sweetspot Pricing is all about getting to the right price for your small business and maximising your profits. Getting more monthly recurring revenue, and how to set the sweetspot price for this is part of this.
Here’s how to get your copy of the Sweetspot Pricing book…