A good place to start is with clear definitions. The recurring revenue model can be defined as a business model that is based on predictable revenues that recur at regular intervals on an ongoing basis with a relatively high degree of certainty. The recurring revenue model is very important to businesses that need more stability, are working toward achieving growth or operate seasonal businesses.
Why you need a Recurring Revenue Model? Recurring revenue is the business model that most businesses seek out for all the right reasons. They want to enjoy the benefits of the recurring model that can include:
- Higher profit margins
- Ability to project future revenue streams
- Closer, more lucrative relationships with customers
- Ways to offset slow times, seasonal fluctuations, or competitive pressures
- Easy pathway to sell more products to subscription customers
- Lower marketing costs once prospects embark on a “sticky” relationship with your business
The recurring model creates a stable business environment because it is highly predictable over time and reduces the stress of fluctuating revenues. It brings a wealth of benefits to your business, though it comes with some challenges. The major disadvantage to a recurring revenue business model is that it starts slowly and will require more cash to get it going. Just like most things, if it were so easy, everyone would be succeeding at it. You’ll need to put some effort into creating your offering and marketing it to your customers. Keep in mind that it may cost more to land a recurring revenue customer, but it will pay off in the end.
Types of Recurring Revenue:
- Hard contracts – As the name implies, your customer signs a contract for a predetermined amount of time and is bound by the contract for that period.
- Sunk money – In this case when the customer initially buys, they need to make recurring purchases that allow for the continuous usage of the product or service.
- Auto-renewal subscriptions – In this case, the business collects revenue automatically until the customer voluntarily cancels their subscription.
- Freemium – Freemium models provide access to the product or service free of charge, but in order to get additional or advanced features, an upgrade to a paid plan is needed.
The Pet Butler Recurring Business Model – It’s no secret that the pet industry is booming. With pet ownership comes extra chores and responsibility. When becoming a Pet Butler Business Owner, you’ll be tapping into a tried and tested source of recurring revenue. Pets’ needs don’t go away or diminish over time. It’s a constant demand that can be met with the quality, affordable services that Pet Butler offers the busy pet owner. From marketing to the right locally-targeted pet owner audience to processes to keep things smooth once a customer has come on board, Pet Butler has all the tools you need to create a profitable recurring revenue model.