If you’re an online business owner or a freelancer, one of your biggest struggles is probably the inconstant cash flow. The lack of recurring revenue, the famous feast and famine periods.
You have months where clients show up from all kinds of places and you're swamped with work.
And other months, crickets…
Even though you may still have a good year overall, it’s really important to have some sort of recurring revenue. We’ll dive deeper into the reasons for that later in this article, but first, let’s talk about the most common types of business models.
It is very common for online businesses and freelancers to charge one of these two ways:
You simply track your time and charge clients by the hour. Charging hourly is great when you’re new to online work and still figuring out how long things take you. It’s hard to predict the amount of work for something you don’t regularly do.
It’s also the best option for some types of services, such as fixing a hacked site. You won’t really know the size of the damage till you start digging in.
But having your whole business based on hourly work doesn’t work long-term. You will get faster, and you’ll either be constantly raising your rates (what you should do anyway, but there are better ways to do that) or you’ll get penalized for getting better at your job.
Charging per project or having packaged services are much better approaches than charging by the hour.
It’s easier to sell as your client will have agreed to the amount beforehand and they’ll be less likely to question prices. They’ll also know how much this specific service will cost and unless there are changes to the scope of the project, there’ll be no surprises.
Two things to consider here:
As mentioned before, it takes time to learn how to charge appropriately. It’s a process and that’s ok. Just make sure you learn from each new client you get (and keep raising your rates).
If you charge per project or package, it’s super important to clearly list what’s included in your contract. Clients have new ideas along the way. If they want new features, you can refer back to the contract to clarify that it was not included in the initial proposal and quote it separately.
They are both valid ways to charge for services, but as your business grows it’s important to think about a more stable and predictable business model. And that comes with a subscription business model.
It may be hard to make ends meet as a freelancer or small business owner. By switching to a recurring revenue business model, say goodbye to the feast and famine.
You’ll have a recurring, stable income and a better idea of your business's monthly revenue. You should have enough money coming in every month to cover business costs (such as staff and premium software) + a good profit margin.
Manually sending invoices and chasing clients for payments is not fun, and can get out of hand very quickly as you scale. If you have a month-to-month subscription model, it’s much easier to automate billing and payments.
And that’ll put an end to wondering whether or not your client will pay you on the right date.
Customer relationships are crucial for any business. So it’s important to create this kind of loyalty with existing clients. Why would they search somewhere else when they already have a system in place that works and it’s easy?
Time is money, simplify your clients' life and they will stay.
It’s a proven fact that when people are subscribed to some sort of plan, they’re more likely to buy more. Selling is much easier for existing customers when they already know you and know your work.
If they’re happy with your services, they’ll likely trust you to do more.
If you ever want to take investments or sell your company, having a subscription-based business will make your business way more valuable in the market.
That’s because investors or potential buyers can better predict their return on investment, making the deal way less risky.
Now you may be thinking…
“How would a subscription model work for my business?”
Trust me, it does.
Think outside the box, and be creative.
Let’s think about web designers or web developers.
How can you put a website on a subscription?
The most common way is a monthly maintenance plan. Websites need ongoing maintenance and therefore, it’s an easy sell.
But let’s think deeper. Why not make the whole website build a subscription?
So instead of paying thousands of dollars upfront, you’d be splitting that over the year making sure your business gets a healthy few hundred dollars per client every month - for as long as the website lives.
A successful website is a living online presence, not a static set-and-forget kind of thing. So you can easily upsell or cross-sell things like:
To name a few! You can see how this is infinitely scalable and from a one-woman show, you can quickly transition into an agency.
Now that you’ve seen the value of a steady stream of subscription income, let’s make sure you take the right steps and are prepared to do it successfully!
Once everything is in place, the subscription model will be easily manageable. But to implement it, you need to make sure you have your systems in place. This will make your life much easier!
Create a step-by-step transition plan, and play out in your head how it’s going to work, from your marketing positioning to onboarding clients.
A good onboarding process can work wonders, not only to make clients stick with you but also to get referrals!
SOP stands for Standard Operating Procedure, and why is this important? Once you transition, your business will likely be growing. And that means growing your team and getting more help.
If you have documentation on everything that needs to be done, the training process will be much quicker and much more straightforward.
How you position yourself and your business in this transition is super important. Why should customers sign up for this, what’s your selling point?
Is it going to save them money? Save them time? Are they going to get more sales?
Focus on what’s in it for them, how is this going to grow their own business?
You definitely want to keep your current customers, so it’s worthwhile making a plan for transitioning them into a subscription model.
It’s good to give them some notice so they can prepare, but also make sure you craft a great explanation on why this switch is beneficial and address any concerns they may have.
Giving them a discount is also a great way to reward their loyalty for sticking with you.
Getting clients to stick long-term takes nurturing. And a big part of that is having great customer support.
It’s a different approach than acquiring one-off clients for one or two projects. So make sure you’re prepared for that and have a great system in place.
There you go, hopefully, this guide helped you see all the benefits of recurring revenue, as well as help you come up with a plan to move to a subscription model.
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