Attracting new customers is an art and a science. The same can be said for selling more to existing clients.
While you need to do both, many small businesses ignore the low hanging fruit of the latter – growth through existing customers who have proven they are willing to pay for your product or service.
Recurring revenue is one of the most valuable ways to create more opportunities. It's like auto pilot for sales. Here are some examples to consider.
If you sell products that wear out but are used consistently, you can create a subscription service for just about anything. Examples?
• My disposable contact lenses are replenished automatically from my vendor, charged to my credit card, and sent to my house every three months. I don't think about it and the store gets my loyalty without worrying that maybe next time I'll try a different provider.
• My local bookstore sends me the latest releases in paperback from a list of authors I have set up with them. I don't need to keep track of which author is releasing what or when. I read everything they write so I get what I want in a timely fashion.
If you sell services that are repeated regularly over a particular time frame, you can book them as a type of subscription. Examples?
• My plumber needs to clean my UV water system and related filters every six months. These are booked a year in advance and charged to my credit card so I don't need to watch the calendar and book an appointment, have cash on hand or write a cheque. When my plumber comes, he can pitch me on an upgrade or other services. I'm usually the one adding services by asking him to look at a non-critical fixture or component.
• My car dealership offers a discount to customers who pay for regular maintenance in advance. This not only insures they won't go somewhere else for an oil change, but just as importantly, they get to look at cars regularly and sell clients on other issues that might be discovered during inspection and test drive.
• Appliances in my home deserve regular service but because the vendors are waiting for a phone call, I need to "get around to it," and I often don't – despite the value of having the work done. They should have me on a subscription service program.
If you sell products that aren't necessarily consumable, there are likely ways to add reoccurring revenue to the product sale. Examples?
• My local musical instrument store offers a maintenance program at the time of purchase as well as lessons to get me started. With lessons, I go from buying an instrument in a single transaction to returning weekly for lessons – accessory sales are bound to tag along.
• My kitchen retailer offers cooking lessons and a subscription to the spice of the month with corresponding recipe ideas, as well as a coffee of the month to keep me coming back and engaged.
Reoccurring revenue opportunities do not need to be extravagant. Think outside the box about how the customer interacts and uses your product after a sale and find ways to make the transaction – and the benefit to the customer – sustainable over time. This also creates more predicable cash flow and a better relationship with clients.
Last but not least, when you choose to sell your company, a high value will be placed on recurring revenue statistics such as sales per customer and long-term retention.
Do you have recurring revenue ideas for small business? Leave a comment and I will share in a future article.
Chris Griffiths is the Toronto-based director of fine tune consulting, a boutique management consulting practice. Over the past 20 years, he has started or acquired and exited seven businesses.
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