Stop - which one
Date: 04/12/2015 | By: Kevin Brent

If you want to make your business more predictable, less stressful, and more valuable then think recurring revenue

In my last blog/ webinar I spoke about why we should build our businesses for value – whether or not we intend to sell – because it gives us options.

Slide1   I addressed the idea of focusing on products or services that meet the TVR scale! – Teachable, Valuable and Repeatable.  This builds on that and reviews different recurring revenue business models to help get you thinking about how you could apply one or more of them to your business.

 

 

You can listen to me talking through this blog in my webinar by clicking here 

 

 

The biggest factor in building for value is the degree to which your business can run without you.  One of the key secrets to that is to build recurring revenue streams – minimising the need to resell every time. The lifeblood of your business is repeat customers.  Intuitively you know this – even if you haven’t already thought about it you will quickly see the benefits once you do.  But this is easier said than done.

This blog looks finding and keeping what we might call  ‘automatic’ customers.

 

Businesses built on recurring revenue streams achieve almost 3 times value when it comes to a sale – they make your business much more valuable but they also make your business much less stressful to run.

 

But can you build recurring revenue in your sector?  Or perhaps you are an accountant and you’re thinking you already do that so there’s nothing more to think about?  Well read on – because it is possible to create a recurring revenue model in almost any industry – and even if you already do then it may be possible to enhance it.

 

So this blog is going to explore ways to build a recurring revenue business based on 9 different subscription models.  Some will be more appropriate to your industry than others, and my aim is to get you thinking creatively about what might work for you.

 

It’s based on the premise that virtually every business can create at least some recurring revenue if you are willing to think differently

 

Any BizSmart clients will know that we try to look for real clarity of focus and to find the ‘vehicle of growth’ – or the handle that we can turn time and again to grow the business.  If we can build that into repeating business so that we don’t have to keep finding and re-selling to new customers all the time then so much the better.

 

If you have a business that you would like to make a little more predictable, a little less stressful, and a whole lot more valuable then this blog and webinar that goes with it could change the whole way you look at your business.  But I will say now that you need to go into it with an open mind!

 

The easy way out for you is to cross your arms and say “That’s all very well for the likes of Apple, Amazon, Google etc but it would never work in my business – or industry”

 

What I would ask of you is that you look at each model and ask yourself “How could I apply this to my business/ industry”  Thinking this way should lead to at least one idea that you could implement.

 

These 9 models are based on the findings of a friend of mine – John Warrillow and you can read more in his excellent book titled ‘The Automatic Customer’ and of course you can talk to us at BizSmart also!

Just incase you haven’t bought into why a subscription model is so important, here are a few reasons:

  • Drive up the value of your business
  • Increase the lifetime value of your customers
  • Smooth out demand
  • Cut the cost of customer research
  • Automate collection of moneys owed
  • Lock in your customers
  • Trigger customers to buy a broader selection of your products and services
  • Protect your business in a recession

So now you’re convinced, let’s take a look at 9 subscription models – in overview at first.  Some will seem self explanatory – some less so:

  1. Membership Website
  2. ‘All-You-Can_Eat’ Library
  3. Private Club
  4. Front-of-the-Line
  5. Consumables
  6. Surprise Box
  7. Simplifier
  8. Network
  9. Peace-of-Mind

 

1.      The Membership Website Model

What is it?: 

Publishing your ‘know how’ behind a paywall.  It establishes an ongoing commercial relationship with a subscriber that enables cross-selling

Examples: 

On-line newspapers like the Financial Times, The Wood Whisperer Guild for hobby cabinetmakers, Syndicated news for sectors such as UK SMEs – Donut

When should you consider it?: 

Do you know something no-one else does?  Do you have:

  • A tightly defined niche market, like woodworking enthusiasts?
  • Access to a steady flow of unique knowledge or expertise?
  • Another product or service that you can cross-sell to subscribers?

Comments: 

The most profitable are usually B2B websites that solve a real problem.  It still usually requires other ways to monetise you subscribers through adjacent products or services (e.g. conferences, coaching, courses)

2.      The All-You-Can-Eat Library Model

What is it?: 

It offers unlimited access to a warehouse of value – you’ll never consume all the information available

Examples: 

Music. iTunes, Ancestry.com, Netflix

When should you consider it?: 

Do you have:

  • A library of content that does not go out of date (evergreen) – or the means to acquire/ build one?
  • An existing ‘fan’ base (blog subscribers, Twitter followers etc) who already consume your free content?

Comments: 

Sprinkle just enough new content to keep it fresh while relying on the large library of ‘evergreen’ content as the foundation

You may need to think creatively to partner with content owners to build a sufficient library

3.      The Private Club Model

What is it?: 

It offers subscribers ongoing access to something rare.   Many offer the chance to meet with a network of people who have ‘made the cut’

Examples: 

Private sports clubs, Genius Network, TIGER 21 Investment Club, Private Retreats, Salon Speaker Series

When should you consider it?: 

Do you have:

  • A service or experience that’s in limited supply and in high demand among affluent consumers?
  • A market of high achievers looking to move up the ladder!?

Comments: 

Force customers to make a decision: if they want it they have to enter into a long term relationship

Keep it exclusive – avoid being tempted to reduce entry requirements to increase volume

 

4.      The Front-of-the Line Model

What is it?: 

Involves selling priority access to a group of your customers

Examples: 

Front of line passes (e.g. Theme parks), Priority check-in, Salesforce.com (2 levels of support)

When should you consider it?: 

Do you have:

  • A relatively complex product or service?
  • Customers (or a subset) who are not overly price sensitive?
  • Customers for whom a long wait could be a big issue?

Comments: 

Can be used in conjunction with other subscription models

You need to have a good reputation for baseline service

You may need to use technology to help you prioritise front-of-line customers

Can work doubly well when your customers are SMEs that lack their own in-house resources (e.g. IT support)

5.      The Consumables Model

What is it?: 

It offers a product (rather than a service) that the customer needs to replenish on a regular basis

Examples: 

The Dollar Shave Club, Blacksocks, Nespresso

When should you consider it?: 

Do you have:

  • Something to sell consumers that naturally runs out
  • Something to offer that is annoying to replenish

Comments: 

You need to brand what you sell as your own – even if you buy it in

You need more than price to compete with the bigger boys – customer experience

Potentially big logistical challenges – large volumes.  Inbound and outbound.

 

6.      The Surprise Box Model

What is it?: 

Another consumables model but a ‘curated’/ selected package of goodies

Examples: 

Graze Box, BarkBox, Standard Cocoa

When should you consider it?: 

Do you have:

  • A passionate, clearly defined market of consumers/
  • A large and varied network of manufacturers that are willing to give you a deep discount?
  • The ability to handle the logistics?
  • A desire/ ability to upsell/ use as a ‘Trojan Horse’

Comments: 

Need to keep providing something new/ surprising

Don’t underestimate the challenge of the logistics – you will need to be able to customise

7.      The Simplifier Model

What is it?: 

You take one or more recurring tasks off your customer’s to-do lists

Examples: 

Hassle Free Home Services, Pool Maintenance

When should you consider it?: 

Do you have:

  • A service that your customers need on an ongoing basis?
  • The ability to sell to affluent, busy customers?
  • A personal service like pet grooming, massage, window cleaning etc.?

Comments: 

Ask your customers what their to-do list looks like and you might find something you could offer

You’d better make sure you can deliver when you agree you will – every time!

Think of the upsell opportunities you could add

8.      The Network Model

What is it?: 

It offers subscribers/ members increased value according to increasing subscribers

Examples: 

SatNav with driver updates on obstructions, On-line gaming, WhatsApp

When should you consider it?: 

Do you have:

  • A product or service whose utility improves with increasing users?
  • Works best if users feel compelled to share the experience
  • Tech-savvy customers – the more connected they are the quicker it will grow

Comments: 

Build density amongst a small group first

Best of companies with access to lots of capital!

 

9.      The Peace of Mind Model

What is it?: 

It offers insurance against something your customers hope will never happen

Examples: 

Tagg (dogs), LoJack (vehicle recovery, Laptop recovery, Alzheimers), Experian, Site24x7

When should you consider it?: 

Do you have:

  • Something that is difficult, expensive or impossible to replace?
  • A business like roofing that allows you to leverage your existing assets (ladders, vans etc)?
  • A history of customer service calls that helps you to predict the likelihood of future claims

Comments: 

Limit your risk.

It is different from the Simplifier Model – you are only helping if the customer needs it

 

In conclusion

So there you have it – a whistle stop tour through the nine subscription models.

If you really think through these and how they might apply to your business, I am certain you will be able to apply 1 or more of the models.  I’d love to hear any thoughts.

 

You can listen to me talking through this blog in my webinar by clicking here.

If you would like us to help you apply these, or any of the other principles we have covered, then please do contact us through the website.  Joining one of our SmartBoards will help you to apply some of these as you go.

Kevin