One-off sale is one of the simplest types of business model. Here, you sell your product and get paid in return, see how simple it is! But, it’s not as simple as it seems. You need to toil day and night for years for the long-term sustainability of a one-off sales business. Wondering, what should be done then? Go for the ‘recurring revenue model’ where you’d get frequent payments for your products and services.
Let’s dive into the details!
Understanding Recurring Revenue:
In simple words, it is the revenue that you can generate for the long run with a high level of certainty. Take it like this! It is similar to the subscription service fees that you pay for Netflix, Xero, Google app, and so on. These service providers that receive a certain amount after weekly, monthly, quarterly or annual intervals are called recurring revenue business models.
This revenue model is the consistent revenue stream, whereby you can generate a large sum of money.
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7 Reasons for Opting Recurring Revenue Model:
Let’s see how this model will affect your business:
1. Minimizes Marketing Cost to Get Clients:
You need to invest more money and time in marketing to get a new client rather than retaining the existing one. Besides, your new clients pay you less than the old ones and expect high output. Consequently, you can save a considerable amount of time, and business expense by following this model.
2. Your Revenue, Cash flow, and Costs are Predictable:
When everything is organized and predictable, you become stress-free. As you get paid after intervals without any hassle. This provides you with enough time to use your creativity for new ideas. In this system, you don’t need to start from zero revenue every month.
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3. Higher Profit Margin:
There is a high margin of profit in this model than in the off-sales business. You don’t need to put in a lot of effort here.
4) Easy to Expand:
You can easily grow and expand your business by charging a certain percentage on your subscription.
5) Strong Relationship With the Clients:
In this model, you maintain a long-term relationship with the clients due to the large contract length. As whenever you’re out of touch with your client, your client might consider someone else for a certain task.
6) More Freedom:
If you establish an organized system of consistent revenue streams through recurring revenue, you get the freedom to do whatever you want aside from it.
7) More Investment Options:
Due to the high level of liberty and space with almost no stress. You can do further investment in other creative ideas to multiply your income streams. You can invest in marketing, research and development, new hirings and so on.
Quick Wrap Up:
With a predictable and recurring revenue stream, you can say bye to your financial worries and focus on your business growth.
We have helped hundreds of businesses to earn a consistent revenue stream. If you want to raise your revenue stream, feel free to reach out to our chartered accountants anytime!
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Disclaimer: This blog is just for general information on the above topic.