Thursday, November 24, 2011

The Magic of Recurring Revenues - Another Strategic Management Tip

Whether you are just starting out or have had your business for years, every business owner should focus on developing recurring revenue streams. Few things have as much impact across so many elements of your business as this.

Recurring revenues streams are the portions of a company’s total revenue which are stable, very likely to continue and can be counted on with a high degree of certainty.

Predictable revenues produce stability, operational efficiencies and enable you to focus your time and energies on growing your business. Not every business can have one, but if you don’t, you should try really really hard to fix that.

Examples of businesses with recurring revenue streams

Examples of recurring revenues are gym memberships, insurance policies, maintenance and support services, telephone, internet and other services. There are many other types of businesses which not only enjoy this type of revenue but which are actually designed and built on this model.

There is a distinct trend right now, particularly with web based businesses to offer services under a subscription model rather than a traditional one time sale and licensing model. In addition to software services being delivered in this manner, most Managed Services Providers of IT services (MSP’s) are setup on a recurring revenue basis.

Benefits of recurring revenues
• Predictable cash flows
• Loyal repeat customers
• Lower sales costs
• More effective sales processes to develop new customers
• More effective sales processes to grow business with existing customers
• Increased revenues
• Increased profitability
• More effective use of everyone’s time
• Business stability
• Enhanced ability to plan, invest, develop, grow, and manage your business

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