Can Your Business Be a Recurring Revenue Business?
Do you remember the days when you used to go to Staples and Office Deport to buy software like MSWord? You got a box with a CD, went home and installed it on your computer and kept it for years until eventually the company stopped supporting that version and you had to trundle back to the store. Several years later you could download it from the internet—no box, no, CD. Today, many people have a monthly subscription to the software they use which entitles them to regular software updates and a bunch of other ongoing benefits and support. This is called SaaS (Software as a Service). Note the terminology; software providers have transformed a product into a service by making it a monthly subscription and adding a number of benefits. In case you didn’t notice, the big thing that changed was that with this new model you no longer keep using a version of the software for several years, it is always up to date. And, you pay for that. For the software supplier they transformed their sales model from customers upgrading every few years to effectively upgrading every year. As a business owner, welcome to the world of recurring revenue.
And, it’s not just software companies. Businesses across almost every sector are finding ways to become subscription-based and turn their companies into revenue-recurring businesses.
For example, the new food and meal boxes we can have delivered to our door several times a week containing a recipe and just the right amount of food to cook a delicious and nutritious meal for our family are revenue-recurring. If you take the time to look, you’ll find examples of subscription-based, revenue recurring businesses everywhere.
The old sales model was to sell a customer once, deliver excellent service and hope he or she comes back to you when they need the product again, or should they need something else you sell. Take Cabernet’s wine store; Fred and Jennifer are wine lovers and regularly visit the store to stock up their wine fridge. They have a great relationship with the owner but have recently came across another local store who also offers an online, subscription-based service whereby they get a dozen bottles of wine a month, delivered to their door, selected by a sommelier based on their specific preferences. If they don’t like any of the choices made for them in any given month they can go online and make substitutions. They still visit Cabernet’s occasionally to buy something special, but now the store is only getting about 10 percent of their business.
A revenue-recurring business allows you to more accurately predict future income. In revenue-recurring businesses, firms use certain metrics to calculate future growth, taking into account things like attrition (customers cancelling their service), and new customers signing onto the service. The ability to be able to predict revenues accurately is extremely value in terms of being able to borrow money, manage cashflow, and plan growth.
The key to having a successful revenue-recurring business is to offer something of real value to customers that is not readily available elsewhere; it has to be worth their while to commit to a subscription or membership service. In the example above Fred and Jennifer were attracted by the fact they would have a sommelier choosing different wines for them each month while having security in the fact they could swap wines out if they wanted to; the timesaving of home delivery was an added bonus.
The keys to any subscription-based service is to ensure customers are constantly satisfied and continually build the relationship. You need to provide great customer service, make it easy to use, make payments manageable, continually offer bonuses or special discounts, provide education, and upsell effectively. That last point is important; as you build trust and loyalty with your subscribers, they will be open to buying subsidiary products and services from you.
Companies can be completely or partially revenue-recurring or subscription based, so consider what opportunities are open to your business. Almost any business can become, at least in part, a revenue recurring business, all it takes is a little imagination.
The New-Age Salesperson
Times they are a changing, unfortunately a lot of salespeople are not following suit. There are old-school salespeople at work everywhere; if you’re not convinced, visit your local big box furniture store, or car dealership, and witness them in their natural habitat. That’s not to say that there aren’t good salespeople out there too; there are, but even the good ones could be better. He’s a quick run-down of the characteristics of a new-age salesperson.
The new-age salesperson is informed, they sell to people who want to buy and discover what their customer needs. They know the objective of each sales interaction and partner with buyers in the decision-making process. They also know that closing a sale is not necessarily the objective of every interaction with a prospect.
He or she plans ahead and knows in advance their customers’ potential objections and how best to handle them. During the sales process, they use open-ended questions; they probe, digging for information and hidden objections—seeking out issues and concerns.
The new salesperson is trustworthy and sells with integrity. They are not pushy and only sell something when it’s the right decision for the buyer. They think long-term relationship, rather than short-term commission.
They understand personality types and build effective relationships no matter the social or behavioral style of their prospects or customers. And, they listen more than they talk. Our new-age salesperson is likeable and welcomed back by customers as a valuable resource.
Finally, our new-age salesperson is always closing; not forcefully, but by asking questions that identify where the prospect is in the journey toward a sale. They use trial close questions which expose fears, concerns, issues and anything that may be standing in the way of a sale. In this way, they never actually need to ask for the order; closing becomes the most natural climax to the salesperson-customer interaction.
The new-age salesperson is a consultant, product and industry expert, confidant, friend, and trusted supplier. And, highly successful.
Coach’s Corner – Having a Coaching Mindset for Your Business
Often, we say that one of our roles as a leader is to coach our employees. What does that mean for your organization? What does it look like for the leader? How does it work for the employee?
“Leaders empower individuals by building trust and coaching competence in their job roles and networking skills.” – Kenneth H. Blanchard, Author and Founder of The Ken Blanchard Companies.
There are basically four aspects to incorporating a coaching mindset into our organization. The first is building trust and connection with employees. Second, when we engage with our staff there needs to be a focus or goal to each coaching conversation that leads to the actions being taken. Finally, we need to follow up and review how effective the actions were and what needs to be done next.
So how do we build trust and connection? The most effective way is to actively listen to each individual. By asking for their ideas and opinions, it shows they are valued and respected. Remember, for instance, that the front-line workers generally have a better feel for what is actually happening than anyone else in the company.
We need to listen carefully, so we can discover what is foremost on their mind. What is the most important thing concerning them about their role? There may be a number of issues but using a coaching mindset we need them to determine the preferred outcome of the particular conversation. What do they need to focus on that will have the most impact for the organization or department? What questions can we ask to elicit what they feel are their priorities?
“The power of coaching is this – you are expected to give people the path to find answers, not the answers.” – Tom Mahalo, Author
Third, what are the resulting actions generated from the coaching conversation? What are the next steps? How will they know if those steps are effective? When we are coaching our employees by listening and using effective questions, they will more likely come up with, and commit to the actions if they were instrumental in their conception.
Follow-up and reflection are the final part of the coaching experience. From the conversation, they will have elaborated on the next steps, the actions to be taken. It is imperative that subsequent conversations ask follow-up questions. What worked well for them? If they were to do it again, what would they do differently? What did they learn from the experience?
Most of our staff seek more responsibility and satisfaction from their work. By adopting a coaching mindset, you will find they will be more engaged and happier in their job.
“In a coaching role, you ask the questions and rely more on your staff, who become the experts, to provide the information.” – Byron and Catherine Pulsifer, Authors and Coaches
Paul Abra, Certified Executive Coach, Motivated Coaching