4 Ways to Add Recurring Revenue to Your Business

culled from:inc.com

In one of our prior articles, we talked about the power of having a recurring revenue business. As a reminder, the more recurring revenue your business has, the faster it can grow, the more predictable your expenses become, and the more valuable your business becomes overall.

But what happens if you didn't have the foresight to build in that kind of revenue into your business model from the beginning? Don't sweat it--here are four ways you can add in recurring revenue to your business tomorrow:

Shift Your Pricing Model

One way to add recurring revenue into your business is shift away from the traditional model of charging your customers a single one-time fee for your product or service and embrace a more recurring model of payment. Let's say you run a software company and you're used to customers paying you a large fee when you close a deal. But why not shift that model and allow them to pay you a monthly fee instead? Yes, it takes willpower to make such a change--and plenty of cash on hand to pay your bills as you work through the transition--but the switch will pay off big time over the long run.

Create a Support and Maintenance Plan

Let's face it--your customers would love it if you could make their support and maintenance expenses for your product or service more predictable. So why not make it easy on them by charging them a monthly fee that will cover any breakages or fixes that might result? This is what happens when you purchase a car and all the maintenance is included in the lease payment. In terms of pricing, an annual contract should be worth about 15-20 percent of the original purchase price, which you can then bill out monthly.

Offer Training

The more complex your product is, the harder it becomes for your clients to keep their staff current on how to use it. That's where you can offer them a monthly training contract that will ensure their staff is always up to date. That can be especially valuable if they are in fast-growth mode where they are always adding new people in need of learning new skills. We know of one company, for example, that built its entire business on such a model where it trains companies on how to use SAP's complex ERP systems. The irony is that this training company is built 100% on a recurring revenue business model, but SAP has very little in their base business.

Do Financing

If your business sells large expensive items, like capital equipment that costs $1 million or more, than it can be quite painful for your customers to come up with that kind of money to pay for it. It can force them to turn to a bank or other creditor to get the money. But if you can shift that purchase into a recurring revenue model--say by charging your customer $25,000 a month for five years--you can create a win-win scenario for both your business and your customer's. This means you are becoming a bank, but it allows you to shift your revenue to the more powerful recurring revenue type. There also banks that will take your contract and give you the funds immediately, meaning you income is paid in a lump sum if you need the cash.

While there are certainly other options you can consider to building more recurring revenue into your business, these are four options you can do fairly easily and immediately. Ideally, you'll find a way to turn 100% of your revenue into recurring revenue. But anything is better than 0%, so even if it's just taking it one step at a time, the value of your business will improve as a result.