How to Build a Business with a Recurring Revenue Model?

Businesses across industries are shifting from a one-time sales model to recurring revenue models. The model was widely used by magazines, music companies, and movie companies for subscriptions. However, times are changing, and industries are incorporating the model differently to generate consistent revenue. In the recurring revenue model, businesses get an excellent opportunity to provide access to services or products in exchange for regular income. Let us discover more about the model and see how you can build a business with a recurring revenue model.

What is Recurring Revenue Business Model?

The recurring revenue business model is commonly used by vendors wherein they provide access to services or products. The business model is the base for membership or subscription services. The fees are charged at regularly scheduled intervals and can be weekly, monthly, quarterly, or yearly. The pricing cycle may vary from industry to industry.

In the recurring revenue model, the customers sign up for access to regular services or products. This significantly helps businesses to have predictable cash flow. Besides this, the model effectively fosters a deeper customer relationship and may help with customer retention.

How to Build a Recurring Revenue Model?

A recurring revenue model may help generate regular income, but it can be hard to maintain. Here are some ways businesses can offer a recurring model to maximize revenue.

Build a Membership Program

A membership program may help you build a community and offer services for a fee. It can be an excellent way to manage your sales funnel and increase your customer base. You can consider charging per month or yearly basis. You may even consider providing different plans for this recurring revenue to increase the chances of getting business. Ensure to provide the audience with forms, resources, and meaningful packaging information.

Offer Standalone Product Subscriptions

Every customer will have a specific need and preference in terms of brand. Most people use and stick to a particular brand regularly. The customer will likely be interested in a subscription to that specific product if any discount or other benefit is available. Most companies use an effective model to build customer loyalty and trust.

Create Service or Retainer Plans

Another effective way to build a business with a recurring revenue model is by creating effective service or retainer plans. There are many industries or clients that need a regular supply of specific products or services. Instead of selling one-time packages, it could be an effective way to develop relationships with the customers and make them buy again. Try offering regular services or packages that cover quarterly or yearly services. Many businesses even consider offering supplemental services that may be related to the industry. For instance, an interior decorator offering cleaning services.

Hard Contracts

Hard contracts are another recurring revenue model aiming to develop strict long-term contracts to build the customer base. For instance, mobile phone companies follow this recurring model to receive payment for their services. There will be specific guidelines that the customer would have to abide by. Additionally, businesses can even charge a fee from the customers if they plan to cancel the subscription.

Online Membership + Physical Product Delivery

Another compelling idea to build a recurring model is by combining two offerings. Consider offering an online membership and physical product delivery to the customers. In this recurring revenue model, the customers who have subscribed will be the only ones to get a chance to receive the product delivery. For instance, it could be a subscription box or a new launch product edition.

Freemium

This revenue model used by software companies and streaming platforms. Initially, businesses aim to provide customers with free plans and services. After that, you will target them to buy and switch to the paid plan. It could be an effective plan as it allows customers to test and analyze if the paid version will be worth it. For instance, YouTube and Spotify offer such programs and claim that the paid plan will provide ad-free music.

Offer Auto-Renewal Subscription

The auto-renewal subscription is a recurring revenue model that works on the ideology that the service will be auto-renewed until the customer ends it. For instance, Netflix deducts money monthly, and the plan may continue to run for months until you voluntarily end it. Plenty of video streaming, audio streaming platforms, educational platforms, and fitness apps are working on this model to maximize revenue.

Sunk Money Consumables

Sunk Money Consumables is another effective way to generate the recurring revenue model. The payment system is an investment strategy in which the customer makes an initial investment in a specific product. However, the customer will have to buy other related products to make that product operate properly. For instance, a customer invested in a coffee maker machine will have to purchase filters and cleaners. This revenue works for the companies and helps them generate more revenue as customers continue to buy the product.

A recurring revenue model can help you build customer loyalty and is an effective way to earn a regular source of income. You may also continue to focus on finding ways to acquire new clients while maintaining a relationship with the previous ones.