Value Recurring Over One-Time Revenue.
A Specific Revenue Stream is Beneficial
I always encourage entrepreneurs to seek a way to book recurring over or in addition to one-time revenue. By recurring I do not mean planned obsolescence or customers buying the latest version of your product when the previous product breaks. What I mean is a specific revenue stream; usually for a service package, maintenance supplies or schedule. Let’s look at a couple of examples:
HP sells printers. That is a one-time purchase. The recurring revenue stream is selling ink cartridges that customers will need to purchase in order to continue using the product.
A personal example occurred during my time in the software business. I sold license fees, which created one-time revenue. However, the software maintenance fees were set at 20% of the license fees per year and these fees were recurring. With this strategy, I was able to double the initial sales revenue over the next five years. The more customers added, the more profitable each customer became. These fees eventually covered all general and administrative and overhead expenses. What this all means is that any additional license fees dropped in large part to the bottom line.
What I Recommend
I always suggest clients look for ways to repackage their product offerings to include a recurring revenue contract, even if it means lowering the upfront costs of some of the products. This should be easy for any business selling a service component, and will be very beneficial to the success of the business.As a business coach, I help entrepreneurs, small business owners and executives to strategize business growth, identify and overcome obstacles, while mentoring YOU to reach your highest potential. If you’re ready for your next step, give me a call at (417) 849 – 3401.