Once you start a business, do not expect smooth sailing. There will be ups and downs, but you at least expect to achieve some baseline revenue. It is not straightforward to accomplish that, either.
How do you get a recurring revenue?
How to create recurring income? When generating recurring revenue, ensure that your business can work without you being involved as a direct salesman. The business must run on its own.
A subscription model
Think of any subscription you might be familiar with. Be it a newspaper delivery, household items, and magazine delivery. Most subscription model businesses like Amazon offer a ‘Subscribe and Save’ of up to 15% for automatic deliveries.
According to McKinsey and Company, 15% of online shoppers have subscribed to one or more products. Sellers offer discounts which are an effective technique of generating a recurring income stream.
Don’t deny your customers the one-time purchase option. However, offering products under discounted subscriptions will make it hard for customers to resist buying.
What is a subscription?
Subscription is used in sales where products/services are delivered to customers at intervals at a set price per interval. Each sale presents a decent offer. The subscription market has grown over 100% in the past 5 years.
Subscriptions work for all kinds of online, offline, retailers and service businesses. Try it, and it could work wonders for you.
Benefits of subscriptions
Benefits for business owners
- Increased customer loyalty
- Increased opportunities to cross-sell or up-sell
- Recurring, predictable revenue
Benefits to customers
- Savings from discounts
- Cost-effective on reducing transactions and bank charges
Popular types of subscriptions
There are several creative ways to get started with your subscriptions. Here are some ways to do so:
It is simple and familiar. You provide this under the “Subscribe and Save” basis. Customers sign up at each interval to receive your product/service at a discount. It is simple and effective.
Subscription boxes went big in 2018. Customers pay a monthly fee where they complete a quick survey on their preferences and receive boxes full of goodies that match their taste monthly. It works perfectly for many industries.
Recurring revenue business ideas
There are numerous ideas on recurring revenue businesses.
Let’s say you run a coffee shop. You can provide subscription boxes for coffee beans. You can give 10 coffees at a discount in a month.
If you have a website that provides information, you can encourage users to sign up and bill monthly to view the information.
Physical product subscription
Consider yums.com. They send in snack boxes from different countries monthly.
Service plans or retainers
Give offers that customers can pay every month. You don’t have to approach customers every time they need assistance with your products. Use a business subscription model where you don’t quote every time.
Be creative and make everything look exclusive. They don’t work for all businesses. Research on your customer base to see if they are willing to pay for it. You can give socks of the month/wine of the month.
In the subscriptions that you offer, present them as gifts to family or friends.
Downside of subscriptions
Subscriptions have some shortcomings. You need to evaluate if the benefits outweigh the disadvantages and make an informed decision.
- Reduced profit margins
You need to use incentives to lure customers into subscribing. Giving discounts greatly reduce your profits. If your product is used daily by users, avoid discounts and instead emphasize on time-saving on the subscription.
- Ongoing management
You need software to manage these orders like Zoho and Salesforce.
- Not for every product or service
Depending on the industry you invest in, it might not work for you.
You must explore deeper about subscriptions to learn the best options available for your business. Ensure your customers are aware of the new subscription model and understand its benefits. Also, learn how to promote your subscription offering.
How to promote your subscription offering
- Blog about your subscription.
- Use an email campaign.
- Create videos on your YouTube channels.
- Share info on your business on social media.
You can offer in-store with flyers, magnets, and any other relevant promotional material.
How will recurring revenue help you get the best funding?
Recurring revenue is a recipe plan for success. For you to be approved for business funding, you need to have a minimum monthly revenue.