The Fastest Growing Business Model Most Businesses Can’t Afford to Ignore
Written By: Kyle Musser
When it comes to the growth of your business, let me ask you…
“What’s your strategy for attracting new customers, retaining those customers, and building a recurring revenue model that’s sustainable?”
This is something that I think a lot when looking at my own business ventures and when it comes to working with clients here at DCLabs.
The reality is, recurring revenue is the holy grail of business ownership.
I mean, what entrepreneur in their right mind wouldn’t want a sustainable business model that produces boatloads of cash a consistent basis…
Problem is, most business owners and biz growth teams have to yet to figure that the membership model or recurring revenue model is THE business model of the 21st century.
Which is quite sad when you think about the fact that more businesses aren’t taking advantage of the Pathway to Unlimited Profits by leveraging this incredible growth model.
And I say that because I’ve been there.
Having founded a digital agency that’s based on new business and recurring deal flow, is quite honestly sometimes a… you know what. 😏
I feel ya Don.
But on the flip side, what makes creative work painful sometimes is also makes it amazing most of the time. I mean… this is why you started a business, right??
The fact is when you start a business, there’s never a lack of problems to solve and opportunities to create.
Which I don’t know about you, but it’s this in-between that drives me to constantly stay in the game. Even with the long days of what seems like an endless hustle when you’re the only person in the office…
You have to remember that it’s all for the love of the game. 🤑
In every business (even serviced-based businesses), I believe that most every business has the ability to leverage a recurring revenue model.
If I stop and just look at the agency or client service model which we use here in part of our business at DCLabs. While it isn’t necessarily as sexy as Mad Men makes it out to be… the reality is that this portion of our business here at DCLabs runs on recurring revenue.
And that revenue comes in the form of client relationships and recurring consulting engagements.
Just look at what Gary Vaynerchuk and AJ Vaynerchuk have created so far at VaynerMedia. Which don’t quote me on this, but I believe a $100M service-based business.
Not that sexy but it can be highly profitable and quite stable after you build the foundation for the business. Nice work so far guys! VaynerMedia 👏🏼
So while we’re not talking necessarily about business-to-business service models, the point I’m getting at is we’re all in the recurring revenue game whether you want to accept it or not.
That’s why I wanted to share with you guys The Fastest Growing Business Model Most Businesses Can’t Afford to Ignore…
Whether or not you’ve yet to realize it, companies across all industries and niche’s are realizing the power of recurring revenue through the membership model.
Big brands like…
Netflix
Adobe
Ditto Eyewear
And even all the way down to small businesses and location independent lifestyle brands…
— via Shopify
— via Corbett Barr Chase Reeves
We live in an age where the membership model can and will continue to thrive beyond what most people can ever imagine.
One of my mentors and founder of Tribe Stu McClaren, describes the real power of the recurring revenue model biz model…
Seth Godin once said… “Instead of trying to escape from your life, why don’t you create a life that you don’t have to escape from.” And for most of you, starting your business was your pathway to creating your dream lifestyle. But in order to create your dream life, you must first start with the perfect business model…
Whether you’re starting a…
subscription based business with physical product(s) as a centerpiece,
membership based business with human capital at it’s core,
or even a SaaS (software-as-a-service) based value exchange,
the reality is membership based businesses are definitely not going anywhere anytime soon.
In fact, the reason I’m sharing this with you today is not only to help you grow your current business (if you have one). But, it’s also meant to highlight some recent updates that I happened to see on CNBC from some big brands that validate the power of subscription-based revenue models.
Let’s first start with Adobe and their Creative Cloud Subscription Based Revenue Model…
Having just recently come out with their Q3 Earnings, the state of the Adobe franchise a whole is a very intriguing sign as to the health of the recurring revenue model.
And while Adobe has excluded their earnings from a reporting basis of recurring revenue for some time now, executives are now seeing the bigger picture…
This release marks the second time Adobe has chosen to exclude Creative Cloud subscription numbers from its earnings, a helpful figure we once used to measure the growth rate of Adobe’s flagship service. Adobe told us last quarter that it made the change to focus on annual recurring revenue — that is, the money Adobe expects to make from subscriptions annually. (We’d prefer more subscription stats, not less.)
Notice that last part right there at the end, “We’d prefer more subscription stats, not less.”
So while I’m a declared creative, I do from time to time go back to my finance wall street and consulting days to dive into the numbers.
Looking deeper into their Creative Cloud, which is their flagship subscription offering… I’m not surprised at all by these changes in strategy.
“Adobe says it added 798,000 (net) new paying Creative Cloud subscribers this Q1 of 2016— that’s 4.252 million in total.
This just reinforces what many of us in the business world already know as this shift to subscription-based Creative Cloud apps is working out extremely well.
And it’s not just Adobe and their investors who are benefiting from this shift which has grown revenue 44% qtr vs. qtr. when compared to 2015. Both consumers and creatives are benefiting from the shift to subscription models.
I know I can personally say I love Creative Cloud. Add in the Creative Stock membership with some basic self-taught Photoshop and Illustrator skills, I’m able to source great looking design work for under $250 total a month.
Amazing times we live in. 🎨 🖥 📷
On top of that, this shift is allowing the convergence of the social + digital + Ecommerce + subscription economies.
Global communities of content creators are able to now build out their own portfolios within Creative Cloud. In addition to getting paid for their creative work that’s being sourced at a large scale to a massive audience of monthly subscribers…
And this is definitely not meant to be an Adobe pitch or to give you an Adobe stock pitch research report. I’ll let my friends on Wall Street take care of that for you…
What this first example is meant to do is iterate my thesis that recurring revenue is the new standard for anyone wishing to embark down the pathway to unlimited business profits.
So not only is this model great for large businesses with established brands that are worth billions of dollars in market cap.
No, the recurring revenue revolution is something that literally ANY BUSINESS can leverage.
Next example(s)…
Take Will Ford, Co-Founder and President of Petbox. In this Entrepreneur Magazine article, he opens up by saying that…
“Brick-and-mortar retailing is a rough business.”
And I definitely don’t disagree with that statement as we’ve all heard (unfortunately) that most (96%) of businesses fail within the first 10 years of opening shop.
I point the “dark side” out first because that’s where media and people many times like to look first.
But personally, I like to focus on what’s successful and what’s working when trying to discover sustainable and profitable growth opportunities.
And it’s this trend of sustainable, predictable, and profitable growth is something that every single business owner should be focused on if you want your business to make it beyond the point of failure and into the realm of a successful business.
So while some people call it a fad or default to the fixed mindset that…
“That could never work for my business,”
You might want to take a minute and give yourself the freedom to dream about what would happen if you could move at least part of your business into a subscription model.
Not only for your sanity of leading your business, but also for your bank account and for the sake of your customers, your team, and your shareholders // investors.
The reality is that whether you choose to accept it or not, your customers today expect a completely different experience when interacting with your brand.
And I speak to this because I’m one of these damn millennials that’s just disrupting everything. I know when it comes to most things I buy, I ask myself…
Do they have a monthly subscription or on-demand service that I can utilize each month?
From Netflix all the way through to the different SaaS companies that I use to power my business here at DCLabs like Leadpages, ConvertKit, Typeform, Buffer, etc. I want what I want when I want it on demand and I want to pay a reasonable price for it.
— Via Kyle Musser
Think of it as the set it and forget type mentality on the consumer side. Which, on the flip side is why a membership biz model can be so incredibly lucrative.
Recurring revenue models are not only much more profitable when set up properly, but they also allow you the business owner to actually forecast your business’s growth in a sustainable and predictable way.
Just imagine for a minute knowing exactly what’s coming into your business each month in terms of revenue because you have access to data and insights like…
New customer growth (new customers),
Subscriber churn (old customers),
And recurring customer renewal (current).
And we’re not even talking about all the different customer development, lead generation, and growth hacks that you can utilize to make this happen.
PLUS, the fact that most people when they sign up for a membership based business they do tend to set and forget.
And while we’re not advocating any sort of bait and switch here by any means… the reality is $10, 20, or even upwards of a $100 per month tends to many times slip under the rug when it comes to our own personal finances. Which is why these business models are much more manageable from a cash flow standpoint of the business owner.
So for those business owners out there… are you still in denial over this subscription based business model shift???
If so, keep reading…
According to the The Economist news desk,
“80% of companies are seeing a change in how their customers want to access and pay for goods and services and 50% of these same companies are changing their pricing models as a result.”
It’s just the evolution of business enabled through technology.
Brands (that are winning) are less concerned about the number of stuff, widgets, things, etc. that are shipped and are more focused on consistency through a consistent touchpoint with a customer.
So while this could be just a fad, my bet is that if big money and big business is putting their efforts into growing out these types of business models, you the small business owner should take note as well.
Actually… more than take note, you should take action like our friend Ryan Lee.
Ryan is someone who’s leveraging this exact business model. In fact, he’s not only leveraging the subscription model… he’s created an incredible business using the same techniques that Netflix uses.
His membership site Freedym, is what he refers to as…
“Netflix for lifestyle entrepreneurs.”
And the subscription mania isn’t just for lifestyle entrepreneurs, here’s a quick list of companies that have raised substantial venture funding to accelerate growth…
- JustFab ($109M)
- BeachMint ($73.5M)
- The Honest Company ($27M)
- StylistPick ($19M)
- H.Bloom ($16.9M)
- BirchBox ($11.9M)
- Trunk Club ($11M)
- Kiwi Crate ($7M)
- Citrus Lane ($6.6M)
- FabKids ($2.6M)
- Wittlebee ($2.5M)
- BarkBox ($1.7M)
- JolieBox ($1.43M)
- Graze ($1.4M)
- Quarterly ($1.25M)
- Foodzie ($1.02M)
- Dollar Shave Club ($1M)
- Manpacks ($1M)
The point is that big and small, traditional and non-traditional… the recurring membership revolution is real.
Even here at DCLabs, we currently have 1 client on a joint venture that’s about to launch their membership and we’re building out the user experience for our membership site that’ll be launching end of this year.
So stay tuned because we’ve got a lot more to come! 🤓
For those of you that are interested in how you can benefit from your own membership business model, I would definitely sign up for Stu McClaren’s waitlist for Tribe…
You can also check out some of his mini-case studies and videos about the Recurring Membership Revolution…
And because we want to leave you inspired to take action, here’s an added shot of motivation…
TAKEAWAY: If you haven’t already, but you could implement a membership model into your business OR you would like to start a membership business that’s build around recurring revenue… what would this look like???
Be sure to leave your comments below and share it with a friend…
And if you’ve found this valuable, I’d be much appreciated if you could leave a HEART below… 💙
I’m Kyle Musser,
Founder and CEO (Chief Experiment Officer) of digitalconversionlabs.com. We know first hand the power of the Recurring Revenue Revolution. So if you’re looking for tips, tricks, and membership-based business consulting… then be sure to come join us in the DCLabs…
Oh and be sure to subscribe to our email list as we give our best content, tips, strategy’s, and much more to those who unlock VIP Access to the DCLabs!
