Adding a recurring revenue model to your business is something that you might have considered, but you may have some questions about how to actually do it. Why is adding this kind of model good for your business? There are several reasons.
First, in any business, but especially an online business, it’s wise to have multiple streams of income. When you have monies coming in from various sources, you are able to create a solid financial base to your business. Examples of multiple streams of income might be direct consulting, courses or programs, books or CD/DVDs, branded merchandise, or you might create additional revenue streams from affiliate marketing or joint venture opportunities.
Membership, or recurring revenue models, are another way to add income to your business. What makes these particularly valuable is that they can offer a reliable and predictable revenue source month after month.
There are many kinds of membership models out there, but the basics are very similar. You develop a program or process (website or software) that you make available to your members for some kind of ongoing fee. Most common are monthly memberships, especially those with sub $10 pricepoints, but there are also yearly and multiple year memberships too.
Adding any kind of recurring revenue model is a great idea, provided you have given consideration to these three areas:
Is Your Business Ready for a Recurring Revenue Model?
1) Who is your recurring audience?
This is important, because not every target group will invest in a membership model type program. If given the choice, most people would prefer to pay once, and to not have ongoing fees. This is why it’s crucial to consider who your audience is, and whether a recurring revenue model is something they will invest in. It’s also important for you, as the business owner, to gauge your level of commitment and focus to maintaining a recurring revenue model; as it takes ongoing effort to attract new members, retain the ones you have, and to keep them interested and engaged.
2) What kind of content can you create and offer regularly?
There are some subscription based/monthly-revenue programs which are based on community rather than content. This means members pay a fee for access to the network/community more than they pay for content and information. They may get that too, but their primary reason for joining is to connect with others in the program.
Another kind of recurring revenue program is one focused around monthly content- where each month, members obtain access to updated information or additional resources in the topic area of the membership site. Some of the most successful sites of this kind provide tools and resources that continually help members achieve their goals. So, for instance, if you create web graphics, you might have a membership for other graphic artists, where they can get new designs each month to speed up their workflow. If you are a jewelry artist, you might offer a recurring membership program where your clients get first access to your custom designed pieces.
Pretty much any kind of offer can work, if you have an interested and well targeted audience.
3) How well can you add new members while retaining the ones you have?
The value and power of a recurring revenue model is based on client acquisition and retention. Most membership sites have a three-five month member retention rate. If you are relying on your membership site income to meet your expenses, you have to be certain that you can add new members at least as fast as you lose them. If you want your monthly revenue to grow, you, obviously, have to add them faster than you lose them.
In many cases, it takes some time for a membership to grow and to reach a place where it retains its members over time. You have to determine if this is the kind of commitment you can make and keep, both to your members and yourself.
Other Examples of Recurring Revenue Models
If you’re not up to the rigor of starting an actual membership site or membership community, another way to add recurring revenue to your business is to offer services that have a recurring component. An example in my business would be search engine optimization services or conversion rate optimization. Both are ongoing and regularly recurring services, which benefits both my clients (they can budget and plan adequately) and me (as I know my baseline income each month as it begins.)
Coaching and consulting are two other recurring revenue streams you can consider- and most businesses can add at least one recurring service to their income generation process.
What if you could generate an increase in email subscribers and client inquiries from some simple changes to your website? You could make more money from the website visitors you already have. This is the basis for conversion rate optimization– the idea that small changes can stack together and create better results from your existing online presence.