All CEOs understand and appreciate the significance of revenue to the success of their companies.
At the start, revenue is dire to the ability of a business to pay its overheads and satisfy any payroll responsibilities. Investors will survey the history of revenue of a company as a benchmark to assess the future viability and potential growth of the enterprise.
Revenue is also an important criterion that lenders use when evaluating whether to extend credit to a company — the lifeblood of almost every business.
The reality is most owners are so absorbed in the day-to-day realities of running their companies that they simply do not have the time to wonder if their companies are making as much income as they should or if there are other prospects to increase revenue-generating perspectives.
What are some samples of recurring revenue streams?
You may be frightened by the idea of recurring revenue streams but you have absolutely no reason to be: Recurring-revenue business models have been around for a very long time now. Here are three collective examples of recurring revenue streams that you may be acquainted with and ought to think about implementing in your company.
Renting or leasing. If you have ever rented a car or Air BNB, you are familiar with this business model. Leasing is a form of generating revenue where a company collects money from a buyer in exchange for giving a consumer the right to use a physical asset for an identified time.
Licensing. Do you pay for any types of online services or media? Do you use any form of email or social media? Your association with those online services is often overseen by a license contract, which sets out terms for how the intellectual property of one party can be used by the other. If one party is required to pay for the rights to use the intellectual property of the other party, those expenses are often calculated based on how often that consumer uses that intellectual property or on the amount of money the consumer generates using the intellectual property of the business.
Subscription. This is the model you are most likely acquainted with. Whether it be your account to the latest video-streaming app, your Uber Eats, or even your subscription to a magazine, subscription-based business models have been everywhere for decades. The success of most subscription-based business models depends on providing ongoing value to consumers in exchange for recurring payments for as long as conceivable.
WHAT TO THINK ABOUT BEFORE INTEGRATING A RECURRING REVENUE STREAM?
While bringing in a new revenue stream for your brand is certainly smart, know that not every recurring-revenue business model is right for you or your business. The truth is that each type of recurring revenue stream needs to be custom-made to the abilities of each company and the needs of each shopper.
Here are a few questions to ask when thinking about the possibilities to integrate a recurring revenue stream into your company:
What worth from your business are your consumers willing to pay for on a steady basis? What price will consumers pay for that value on a normal basis? What variations in your business operations need to happen to make these income streams a reality?
Once you are able to answer these questions then you will be ready to add a recurring revenue stream to your business.