Can you imagine waking up knowing that your business will cash flow that day? It is possible. Removing that stress will release your energy to do great things! Does it Sound like a miracle to you? Maybe it doesn’t happen in your industry. Take a close look around. Reoccurring sales abound! Many are Subscriptions and membership programs such as Amazon’s “subscribe and save” feature, Cellphone service, online storage, magazines and even meals.
There are many types of sales. Some are one time, some occur on a regular basis based on need. There are upsells like McDonalds asking if you want to add fries to that sandwich or the appliance store asking if you want to add the warranty. There is the low investment introductory offer. I like offering three levels of service – good, better and best. Think car wash here. There are loyalty programs that reward your customers when they buy multiple times. However, here’s the key – having multiple sales streams strengthen the financial security of a business.
A profitable sale is a gift but not all sales are created equal. To build a business or to crank start the cash flow, month to month reoccurring sales is a quick start. Once generated, Month to month sales bring in a predicted cash flow every month. It doesn’t require the business to find new customers every month.
To find one that works for you. Here are 5 types of recurring revenue:
Hard contracts. A great example is your cell phone contract. When the iPhone launched in the United States, AT&T insisted that you buy a three-year contract. You pay for the phone along with the service for a set time. The stock value of AT&T mobile went up and down based on that contract revenue.
Automatic renewal subscriptions. These can go on forever, or at least until a customer tells it to stop. Commonly known as an “evergreen.” Document storage subscriptions such as google, newspaper and online weight programs are good examples of evergreens.
Sunk money subscriptions or consumables. A customer makes a large initial purchase and then must purchase their accessories to utilize it. An example of this is purchasing an apple or a Mac, and then required to purchase their software to utilize it. Or purchasing a Keurig coffeemaker and then purchase the appropriate coffee k cups to enjoy it.
Straight-up subscriptions. These are subscriptions with a defined period, such as annual subscriptions for magazines or newsletters. They offer an optional renewal at the end of the contract.
Simple consumables. A business offers consumable goods such as beauty products, meal kits, grooming products, car washes or even coffee for a certain monthly fee. The customer becomes a loyal customer coming back for more. Most common is the “subscribe and save” feature on products.
We have a reoccurring service at FOCUS CPA. We offer a package of annual services for a fixed price agreement payable each month or quarter.
Establishing reoccurring revenue isn’t only good for your business today – it ensures you’ll get the maximum value when it comes time to sell.
Contact us for a sales strategy meeting to brainstorm how to implement a reoccurring sale in your business.
By Mary Guldan-Lindstrom, CPA