Recurring revenue — every business owners’ dream

Rachel White
Jul 20, 2017 · 3 min read

Consistent, predictable revenue every month is the dream of every business owner. No more trying to keep the pipe full every month……

There are lots of benefits to it. The most valuable businesses in the world are those that can show a recurring revenue stream. Oil companies fill a never ending demand (for now). Software companies like Google sell ads & business apps paid for monthly.

How about Apple? One of the reasons they need to launch a new iPhone reasonably often is to continue the sales cycle. i-Tunes is their regular income source.

How about if you’re a service provider?

For most people who sell a knowledge based service, the traditional models are:

- an hourly rate * the number of hours worked OR

- a fixed price for a specific project

The first one (hourly rates) is used by the accounting and legal professions. The problem is it’s creating a barrier between them and their client. Their client doesn’t want to pick up the phone and call them because the “clock’s ticking”.

Many of them are moving to a monthly retainer model. It’s a model I’ve used personally for six years, and I’ve never had a question on a bill.

So where does it work well?

Do you have a high touch service which needs a lot of check-ins?

For an accounting firm, if they’re doing the bookkeeping as well, this is a very regular task. A fixed amount each month gives predictability to the client.

They also sell a recurring service. Your accounts and tax return need to be done each year.

For a medical service, a retainer wouldn’t work so well. It’s an area you’d really rather a few less check-ins. The last thing you’d want is a doctor motivated to see you every month!

For lawyers, normally they’re engaged to do a piece of work. Review a contract. Advice on an acquisition. Deal with a curly employment issue. These issues have a beginning and end date. Again, not something you want every month.

To create certainty for their clients, many lawyers are setting a fixed price for a project.

Coffee shop owners (such as James) have a recurring revenue stream. Many people buy a coffee every day, in some cases several times a day.

How about someone who’s a very successful career coach?

Up until now, they’ve sold coaching packages. You have an initial session with them, then book in for another 4.

Traditionally, career coaching was to help you when you hit a crossroads. For most of us, we’ve been trained in one area, and stay in that field most of our working life.

Hence your need for that service was 2 to 3 times in your lifetime.

That’s all changing. Those entering the workforce now will work until they’re 75. They’ll have (on average) 12 different careers.

The number of cross road points in their lives will go up substantially.

Wouldn’t it make sense to learn how to manage your career, rather than deal with it when it gets “stuck”.

I’m sure the career coach can figure out how to communicate it, however it does create an opportunity.

Can they transform their “project based” model, with a start and end date, into a recurring service. The increase in cross roads points suggests they can.

Let’s say you do make this transition? What are the pitfalls to watch out for?

- how do you figure out what the retainer is? For service providers, your cost is still your own time (which has a value). The retainer needs to create a profitable income stream for you.

- if you’re spending more time that you thought each month on a client, how do you take the retainer up?

- one of the reasons you went into business for yourself was the freedom. How do you take a month out if your touch points are every month (one I’ve personally struggled with)?

For our career coach, the current transition in careers creates a substantial opportunity.

Rachel White

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CFO | Writer | Cat lover | Budding amateur chef