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How to Add Recurring Revenue Streams to Your Service Business

Jacob Brain


If you run a project-based company, you can only imagine the seemingly nirvana-like state of having monthly recurring income. All you know are the highs and lows of securing contract after contract to sustain your business.

Now, imagine a world where you have recurring income for your services month-to-month, lowering the need for recurring sales and allowing you to steadily forecast growth.

This fantasy world is actually possible. Here are some ways to make it happen.

First: depending on the nature of your business, the modes of making this a reality will differ. So, as we begin, take notice that all of these concepts may not apply to you.

Yet, most of us have a few basic services that could be turned into subscription revenue very easily.The simple measure of this is to consider how timely or important these services are to a business. If you create architectural drawings for new buildings being developed, for example, it may be harder to offer a subscription service. Yet in that same case, you may have a way to offer hosted digital plans to layer on the BIM models, or a plan archive that would allow you to charge for that on a monthly basis to increase your revenue.

The concepts of subscription revenue are only bound by our mind. Simply find the core of the value and build out from there.

Hopefully this will start the engine of possibilities and your creativity will take it from there.

1. Move from Fixed to Recurring Charges for Frequently Purchased Services

If you have a service item, such as an inspection or a recurring maintenance item, it would be great to roll this into a recurring subscription model. We would do this by determining your cost and margin, then finding a way to make it more advantageous for the client to purchase the item as a subscription.

One way of doing this would be to find a way to make the price lower than the average purchase price by calculating the usage over the expected revenue.

For example, you might run an hourly rate for a service such as modifications to a floor plan or ad hoc consulting. If this rate is 200/hr, and the client typically uses 1-3 hrs a month, that means that some months they’re spending 600/mo for your consulting. You know that last year this equated to 5,000 in revenue, which, on average, was only 417/mo.

Could you approach them with a subscription of 3hrs in consulting each month for 500/mo? Because they’re likely worried about the peak charges and understand the value of the service, there’s a good chance they’ll find the consistency of the model appealing.

What you’ll see from the get-go is that they’ll use the time. Then, over time, they’ll stabilize to their previous usage or fall away, increasing your margin. There is more to how you structure the subscription, but for this illustration, we’re trying to paint with a broad brush to illustrate how we’ve done this and seen it done.

2. Add Value to the Existing Service to Bridge the Gap Between Purchases.

For example, if you were doing bookkeeping for a client on a quarterly basis, you could turn that into subscription revenue by averaging your price over the year plus 10% while adding a little more value to the process – some additional reporting trend analysis, for example, or some consulting to make the gaps disappear.

If that sounds simple, it’s because it is.

How many times do you use Amazon prime because you can? You’ve paid in, right?

This is a great example of the way that perceived value increases the use of a service. If you added consulting to your subscription, but most of your services lay outside of that consulting in clear defined ways, you’ve basically created a financed sales funnel.

3. Address New Problems That Your Client is Not Addressing.

New problems are latent opportunities for subscription revenue. For example. if there are security risks with a new piece of software your client typically runs, or maintenance to systems that a client is neglecting, there are opportunities for service.

Or, you could look at industry best practices as a driver for identifying the gap between what a customer should be doing and what they’re doing currently. This is really the key in striking the nerve with a client.

Many companies have a few exposures to risk that should be covered.

As professionals, we know where our clients are lacking in what we would recommend as the best practices. It’s our responsibility to alert them to this and provide a reasonable cost of service to fill that gap. This is where your subscription service – even at a low price, like $50 a month – could create value. All you need to do is take accountability and responsibility for your client in this under-served need.

Get Out the Whiteboard – It’s Time to Brainstorm

So there you have it: three concepts to wrap your head around as you consider how you can turn your service into a subscription.

If you’d like to spend more time with these ideas, let’s schedule a free consult. We can discuss your business model, and take a look at the ways you can make this happen for your business.

The reality is this: the subscription economy is well in place, and consistent-revenue-nirvana is possible.

Now, it’s time to join in.

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