48. Why You Should Consider Implementing a Recurring Revenue Model in Your Business
Recurring revenue models can provide our businesses with many benefits. “The recurring revenue model is the model most commonly used by businesses because it is predictable and it assures the company’s source of revenue as ongoing.” (Source: corporatefinanceinstitute.com) In addition, introducing subscription-based services or recurring revenue models to our products or services could increase our valuation by up to eight times that of a comparable business with little recurring revenue (Source: fusebill.com).
Katie Harris is one of the managing partners at Get Found First, a digital agency that specializes in PPC (pay per click) advertising. She is also a member of the Forbes Agency Council. In today’s episode, Katie Harris and I discuss the benefits of the recurring revenue model.
Benefits of a Recurring Revenue Model
According to Katie, recurring revenue is one of the greatest things ever created for a business owner. Katie has clients that work in all areas of business. Some have recurring revenue models and some don’t, but Katie has seen many of the benefits recurring revenue can provide.
She thinks those clients with recurring revenue models sleep better at night, not having to worry about making the next payroll. Recurring revenue provides stability in a bad economy or bad times. With recurring revenue business owners have some idea of what cash flow is going to look like month to month, which is incredibly important to allow for planning, investment, hiring, and growth. Recurring revenue takes away a lot of the risk.
Another benefit to a recurring revenue model is it frees us up to be a little bit more creative with our businesses instead of having to focus on making payroll each month. Recurring revenue can also make it a lot easier to make long-term decisions. Once we have a recurring revenue model in place, we just have to look at what is the next thing our clients need and how can we offer that product or service that they’re going to need.
“If there’s a way you can look at your business and find a way to create a recurring revenue model somehow within it, your days will be better.”
Restoration Companies and Recurring Revenue
Katie works with a lot of restoration companies, and it is very difficult to implement recurring revenue within restoration companies. Recurring revenue is the most common challenge her clients face no matter what part of the country they’re in. There just isn’t an inherent recurring revenue model for restoration. That means cash flow is always a challenge because they might be so busy in December when weather events hit, when pipes freeze, or basements flood but come March or April and they’re wondering how they’re going to keep their employees busy. A recurring revenue model takes a lot of that inconsistency, instability, and risk out of the equation.
For example, many of Katie’s clients pair restoration and cleaning together. Katie had one client that only focused on the restoration aspect of the business. Year after year this client was struggling to keep their employees busy at certain times of the year. Then, they added carpet cleaning services, which was an easy way to implement a recurring revenue model. The client purchased all the equipment, and they already had relationships with potential clients from their restoration work, so they could easily set up a model where they clean a customer’s house every 90 days and the customer pays for that every month. They were able to keep their employees busy and apply a recurring revenue model to the business that gave their business much more stability.
Recurring Revenue and Building Long-Lasting Relationships
Something that has been important to Katie is when she has a recurring client, she has a longer period of time to build a relationship with that client. It is so important to move from a vendor-client relationship to a strong relationship. For those first 30 days, Katie and her associates are still a vendor to their clients, but then they start to connect with their customers in a different way, showing them they really care about their business.
At Get Found First, they look at the first 90 days as a time to build a strong relationship and connect with their client. Their recurring revenue model is not automated in the sense that a client buys something once and never hears from them again. Instead, their model is set up in such a way that the relationship grows month after month, getting better and stronger.
This model also gives them time to get to know their clients’ goals. They spend the time, in the beginning, to go in and understand the highest level passions of their target audience, in Katie’s case the business she works for. When we understand what those top priorities are, we can then build a relationship with them, connect with them, through those highest-level priorities and passions.
How COVID-19 has Impacted Katie’s Business
Initially, Katie’s business had a 20% decrease. It was heartbreaking for her to watch what was happening. Every business was unique, and each experienced a bit of a roller coaster in different ways. Get Found First had a client based in San Francisco that booked tours and travel for Japanese tourists, and COVID was extremely hard for businesses like that because they could not operate in the pandemic environment, and there was nothing Katie could do to help.
She also had clients that had to shut down because of orders by the state or different situations like that. Luckily, that was a very short-term thing and about 92% of those clients are back. They were also fortunate to have many clients doing e-commerce, who had record-breaking sales during the pandemic. The huge growth can also be stressful as they figure out how to deal with that many sales.
Another large chunk of Katie’s business is focused on in-home care for the elderly, restoration services, sanitization services, or taking care of floods or other disasters. These services didn’t stop, so for that Katie is very grateful that they had a strong client base in those industries.
Bridging the Credibility Gap
In the early years of Katie’s business, they had a hard time convincing people in their small town that they were really good at what they did; they couldn’t get people to do business with them, so they focused on getting business from other more populated areas like Chicago and California.
A representative from Google came to talk to Katie’s business and asked them about their local clients. Katie told him they didn’t have any local clients because they couldn’t convince them that they were trustworthy. The Google rep was incredulous. He told Katie, “you have a responsibility to take care of people in your local community. If you need to convince them, convince them, but you have a responsibility to do it.”
This changed Katie’s way of thinking. She started thinking about how to change these perceptions and build credibility. It was around this time that they had some great opportunities with Forbes and different recognitions from Google. They shared those points of credibility and it helped a bit.
Ultimately it came down to relationships and trust. The way she bridged that credibility gap was through talking to people and being real with them. Katie’s business hosted one-on-one meetings and joined the local chamber of commerce and BNI group, not to tell people how great they were, but to make connections and see how they could help people. It took time, but they were able to bridge that credibility gap.
Katie’s first piece of advice when it comes to video marketing is to just start. It doesn’t have to be super professional as long as it is real. Stop waiting for it to be perfect. We can easily pull out our phones and film a genuine client and just let them talk. If we start somewhere our video will get better and better as we go.
Then we can start looking at what is common and what is going on in marketing. Right now we’re seeing major shifts in consumption of YouTube videos. They are being viewed at an unprecedented rate, and it’s only going to grow. Each day, people watch more than a billion hours of video on YouTube (Source: blog.hootsuite.com).
Katie has a local client that sells appliances and furniture. They’re very successful, but they have an annual parking lot sale that has been a bit stagnant for the last couple of years. Katie helped them do some videos promoting it on social media. The sale was a huge success that year and those videos were the only thing that changed in their marketing.
Google and YouTube Ad Strategies
Katie has a few tips for using Google and YouTube ads. The first is to understand your audience. Google’s and YouTube’s audience targeting is fantastic, so the number one thing we have to do is figure out who our audience is. Sometimes who we think they are is not really who they are. We must take a look at our Google analytics and see what kind of secrets or insights about our audiences we can get from that. Then we can see how to implement targeting based on those audiences.
For example, we might think our best audience is a 40-year-old woman, but if we dig into our analytics and figure out our best audience is actually somebody who is really interested in the stock market and in traveling, now we’ve expanded the whole approach to who we can target.
Katie’s next tip is don’t be afraid to ask questions. Sometimes we waste a lot of time because we are afraid to ask for help or we don’t know who to ask. To solve this, we should find someone with experience and knowledge and simply ask them for help.
Katie’s last piece of advice is to subscribe to Think with Google. It’s a free service with a lot of information that’s going to keep us on the cutting edge and keep us thinking big with forward-thinking.
Thank you so much Katie for sharing your stories and knowledge with us today. Here are some of my key takeaways from this episode:
1. Recurring revenue models can help business owners sleep better at night, provide stability, reduce risk, allow for more creativity, help us make long-term decisions, and plan for the future.
2. If there isn’t an inherent recurring revenue model for our business, we may be able to find things related to our business that we can set up in the recurring revenue model.
3. We can use the month-to-month or annual time that recurring revenue can give us to build stronger relationships with our customers.
4. If our businesses are experiencing a credibility gap, we may be able to bridge that gap by getting involved in the community, talking with people, and being authentic in the connections we make.
5. Start somewhere with video marketing. It often doesn’t have to be extremely professional at first.
6. When using Google and YouTube ads, use their analytics to learn about our audience. Don’t be afraid to ask questions and consider subscribing to Think with Google to stay informed.
Connect with Katie
If you enjoyed this interview and want to connect with Katie or her business, you can find her on LinkedIn at https://www.linkedin.com/in/katie-harris-idaho/ or reach out to her directly at firstname.lastname@example.org.
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