Creating recurring revenue streams
One of the biggest challenges that business owners face is cashflow.
In today’s episode, I chat about what recurring revenue streams are, what you should want to create them in your business, and how you can create recurring revenue streams in your business.
In this Episode:
- 01.12: What is recurring revenue
- 02.15: Why create recurring revenue in your business
- 09.38: How to create recurring income streams
One of the biggest challenges that business owners face is cashflow. In today’s episode, I’m going to be talking to you about recurring revenue. I’ll talk to you about what recurring revenue is, why you should want to create it in your business. And most importantly, how you can create recurring revenue streams in your business. I think this episode is packed with value, so make sure you stick around to the end.
Hello and welcome to The Clare Wood podcast, where myself and incredible guests share about money mindset, financial successes, and how to manage your money in a fun and practical way to create wealth and abundance in both your business and your life. I’m your host, Clare Wood. I’m a business coach and a money mentor. I strongly believe that money has the power to positively change the world. I can’t wait to help you transform your mindset around money, create a love of numbers, and build the business of your dreams so you can live a life of financial freedom, giving, and global impact.
What is recurring revenue
So what is recurring revenue? Well, like the name says, it’s revenue that is recurring. There are two ways that you can have recurring revenue. It can either be contracted recurring revenue, i.e., someone who is obligated to pay you that amount of money for a certain period of time or it can be non-contractual recurring revenue, but with a relatively high likelihood that people aren’t going to stop paying. An example of this could be something like a low-ticket cost, like a subscription or a membership, where fairly reliably most people who are paying that revenue are going to continue to pay you that month after month. I just use the term monthly there, but of course recurring revenue can be over any period of time. It could be quarterly recurring revenue. But for the purposes of today, I’m going to talk about it in the context of monthly recurring revenue, so money that is pretty consistently coming into your business.
Why create recurring revenue in your business
So why would you want to create recurring revenue? The first reason is that it smooths your income and creates consistency with the cashflow you were going to be receiving in your business.
On the podcast, I shared last year that I hit my first $50,000 month in business. And it was such an incredible feeling. However, what happened was that a big chunk of that $50,000 was pre-payments. So it was a prepayment for a private coaching client of mine, and there was also a prepayment for the Mastermind in there. And that is so lovely to have an amazing month, of course, but what I noticed that happened for the months afterwards was that I had a lower income than usual because of this prepayment. Now, particularly for me because I have a husband who works in recruitment, so his business is very volatile in terms of income. He can have fantastic months, and then he can often go weeks or months without receiving any more revenue. So with a business like his that has such volatility, I really wanted to create stability in my revenue streams in my business. And to be honest, it’s something I encourage my clients to do a lot as well.
Even if you have a business that has big, beautiful, juicy launches, I still think having recurring revenue streams is a really powerful business strategy because it can take a lot of the pressure off any one particular pace of launch activity or waiting for one particular project to come in. I’ve spoken about this on the podcast before about the energetics of selling and the magnetism that you have when you aren’t so dependent or desperate for a particular launch or project to come off. I really think that when you have the confidence knowing that you have revenue coming in in your business, then you aren’t being so stressed about one particular launch, one particular project, or one particular client. So in my opinion, the fact that you have recurring revenue streams, in and of itself, actually helps you to make even more money.
The other reason why I love recurring revenue is because it allows you to forward plan your expenditure and your investments confidently. I may have shared this on the podcast before that I am very heavily re-investing into my business at the moment. So I have all of my regular business expenses, which includes my amazing VA, my incredible podcast editor, I also have a high-ticket coach that I am working with. And this is, by far, the biggest expense that I have both in my business and my personal life. I also have regular subscriptions and all the systems that I subscribed to that helped me to support my client and my future clients, such as my online portal and all of the programs that I use to support me in my business.
On top of all of those regular business expenses, I am also doing some pretty significant one-off investments. A couple of them include, I am writing a book at the moment. Make sure you watch this space. Of course, I’ll be sharing more about it in the future. So I am working with a ghost writer/book editor on this. I am also investing in having a new brand created at the moment, and I’m also having a beautiful new website made. And creating a new website is not just the expense of working with my web developer, but I’m also investing in copywriting, videography, and photography. So like I said, I’m investing really heavily into my business at the moment. So how can I confidently do this? Because I know reliably the income that I have coming in over future months.
At the time of recording, my recurring revenue is about 35,000 Australian dollars a month outside of launches. So this is money that I know is coming in pretty consistently month after month. I’m not sharing this amount to trigger you or make you feel uncomfortable, but I’ve really openly shared about my numbers on this podcast journey to help you guys witness my journey of growth along the way. And because I want you to feel comfortable knowing that no matter what stage you’re at in business, that you can continue to grow and up level your income. And I really hope that me sharing my numbers inspires you in this space. And at this point in time, I also want to remind you, this is not all money that I get to keep. I obviously have taxes to pay on that. And like I said, this money also includes a lot of investments that I’m making back into my business and hence being able to support a lot of other small business owners with their businesses as well and, of course, my team that I regularly pay as well.
So how have I been able to create recurring revenue of this amount? At the time of recording, this revenue amount is made up of the following, my private coaching clients, my Mastermind revenue, my membership, and there are also payments coming in from courses that I have run, on which I have offered payment plans, which means that people were able to pay it off over a period of time. At the time of recording, I am doing a launch of my Mastermind. So in the future, I will also share a bit of a reflection on this launch process and how it has impacted my business revenue moving forward. Big detour there.
But the point that I was trying to make is that the way that I am able to confidently invest into my business is because I can look forward. I know pretty consistently what cashflow will be coming into my business and at what point in time. This gives me the confidence to invest, knowing that I will have enough cash to cover not only my business expenses and the investments that I’m making, but also the income that we need to keep our household ticking along. This is why I really encourage you to think of that creating recurring revenue in your business. It enables you to confidently forecast your cash looking forward. It enables you to confidently invest in the things that you want to do that you know will help up level your business. And most of all, it gives you confidence. It means that you know that you have the revenue coming in that you need to cover, the expenses to give you the lifestyle that you desire. So hopefully, I’ve convinced you of the importance of creating recurring revenue now.
How to create recurring income streams
So let’s get to the juicy stuff. How can you create it? Okay. There’s two ways that you can do it. Number one, you can either create ways to smooth your cashflow. So if do project-based work, for example, you might be a web developer or supply legal services. So what you could look to do is introduce payment plans for your services. And something I’d like to point out at this point in time, if this is something you choose to offer, it is very reasonable to charge an additional fee for the fact that you are allowing people to pay off their services or their project over a period of time. There’s a number of reasons for this. Firstly, because there is a risk that you incur that someone might not meet their payments. And if this was to happen, you could potentially incur legal expenses to recover the costs that are owed to you. Another reason is because of interest. If the money isn’t sitting in your pocket and sitting in their pocket for longer, it is very reasonable to charge a fee to cover that expense.
The second way that you can create recurring revenue is to create revenue streams that are recurring. This is where you have a revenue that flows in pretty consistently a month after month. So what can a recurring revenue stream look like? There’s so many different options, but today I’m going to share with you a bunch of ideas of how you can create some for your business. You could create a group coaching program, teaching other businesses or individuals how to do what it is that you do. You could create a membership where people pay you an amount of money to learn from you every month. You could charge a fee to provide industry updates to your audience. You could also have a subscription model where they receive something from you every single month. You could also put clients on to retainers.
So what does a retainer look like? A retainer is where you are paid a fixed amount every month regardless of whether people use your services or not. Now, you might think, “Who would want to do that?” Plenty of businesses are more than happy to pay a retainer. And let me share some examples. One could be where someone pays a legal firm are retainer. And why would they do that? Because if they needed legal help and are working with someone who’s fantastic and often booked up, they might not be able to get access to that lawyer urgently. And so for them, even if most of the time, they don’t actually utilize the service, they are paying that price so that they know that they will always have that space or access to that professional. I’ve seen examples of this in many other industries too, such as copywriters, designers. You’re basically paying someone to have them on-call if you did need them. That might be something that you could introduce in your business.
Other ideas of recurring revenue is to offer payment plans on your courses or, as I said before, even on your services, or you could create passive-income products, such as eBooks or templates. These can exist across many different professions. For example, if you are a photographer, you could have a subscription when people get stock images each month. If you’re a designer, you could create a bunch of templates that your clients could use. If you’re a social media manager, you could create some social media caption templates that someone gets every single month or email marketing templates. Or if you’re a web developer, you could offer a service of website maintenance where people pay a recurring fee each month to make sure that their website is kept up to date. As you can see, there are a huge range of ways that you can create recurring revenue. And this is just an example of a few ideas. I’m sure there are plenty of other options out there too if you put your mind to it.
So on recurring revenue, a couple of things at this point in time I would like you to take note of. Firstly, make sure that you have very robust contracts in place. If you are depending on this income to becoming into your business, you want to make sure that people are contractually obliged to pay you that amount or you could end up in a bit of a sticky situation. I would highly recommend that you work with a legal expert to have these created properly. If you need recommendations for a lawyer, please reach out to me, just drop me a DM on Instagram @clare_wood_coach, and I’ll let you know a legal expert that I highly recommend.
The next thing to note, if you are creating “passive income” from things like eBooks or courses that run off a funnel that doesn’t require any input from you, make sure that you have a very clear understanding of how that sales funnel works and if you need to invest money in it to get a return. So an example of this might be that you sell eBooks, but you sell them through Facebook ads. So, when you are looking at creating these revenue streams, make sure that you’re super clear about how much you need to invest and what the ROI or return on investment needs to be for this to be a cash positive income stream.
A few other things to bear in mind when you’re creating revenue streams, think about the price that you are going to charge. A higher cost can often mean a higher investment of your time to deliver that product or service. An example of this is with my private coaching clients because they get weekly one-hour course with me, and they also get access to me through a voice messaging app called Voxer, so they can message me regularly. So you can see that a higher-cost product does mean a higher investment of my time. Lower-cost products can perhaps, although not always, mean a lower investment of your time and energy to continue to receive that money coming through. Of course, both of these are not necessarily truths and there are always exceptions, but it’s just something to consider or bear in mind when you are thinking about what revenue streams to create that work best for your business. I believe that the lower cost investment that people are making, the less likely they are to cancel it at the end of a contract.
Another thing that I want to say in this space is that I have heard anecdotally that people who actually invest a higher amount can sometimes be less maintenance than the support or assistance required for really low-ticket offerings. I personally haven’t experienced this as I mostly offer premium high-ticket services. And actually, I have found that my clients are really not that needy, and I really don’t have many customer service issues. But I have heard that sometimes when you are selling really low-ticket items, that can be a lot of fiddly customer service work that needs to be done. So again, just something to bear in mind when you are determining what your revenue streams are going to look like.
So to sum up today, if you would like to create recurring revenue, firstly get really clear on why you want to create recurring revenue streams. Then, determine what your recurring revenue is going to look like. Maybe you have one offering or a series of different offerings that you’re going to offer to your audience. And then, think about your pricing, work out what is going to be best for your dream clients and also what is going to work best for you and your business model. Recurring revenue can be a fantastic way to create confidence and stability in the income that you’re receiving in your business.
Thank you so much for tuning in today. If you enjoyed today’s episode and think that your audience will benefit from it, I’d be so grateful if you can please share it with your audience on either social media or on your email list and make sure that you don’t forget to tag me so I can say a special thank you for taking the time to do so. Have an amazing week and I look forward to chatting to you again next week.
Thanks so much for listening. If you loved this episode, please share it with your audience and don’t forget to tag me on Instagram @clare_wood_coach. And also, make sure you hit subscribe so you never miss an episode. Have an abundant week, and I look forward to talking to you again next week.
About your host
Hi, I’m Clare Wood – I’m a numbers geek, a travel lover, a reality tv addict, and a passionate business coach. I’m here to empower you to create an extraordinary business and an amazing life; because I believe you don’t have to choose between the two.