Maximize Your Business Value With Recurring Revenue Streams

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When the Software As a Service (SaaS) model came out it was scoffed at by the big global software companies. No one is going to run their business “over the internet” and actually trust someone else to manage the IT and infrastructure. Combine that with the low cost, which seemed to imply low quality, minimum feature sets and of course “little benefits.”

This was ten years ago, and my, have things changed. The biggest ERP shops in the world – Oracle, SAP, WorkDay – are all scrambling to shift to the SaaS model, which has been a tough transition. Their entire sales model need to change, commission modeling and incentive management, not to mention their go-to-market strategies. How do you replace multi-million-dollar sales of in-house software and consulting, expensive user license agreements, including lucrative maintenance contracts that last years?

It’s the world we live in and take for granted now.

The power is in the monthly recurring revenue, the subscription model that in this case is based on a monthly fee per user per month. The more users you get on your subscription model platform, the more monthly revenue you make. When you combine that with paying for the service in advance, sometimes requiring an annual license paid upfront, and you can see two things. A very valuable sale with a lifetime value many multiples above a single sale, and a positive cash flow engine that brings in a lot of cash upfront every time you sell more of your product and service.
It’s a no brainer when you look at it this way.

So, let’s transition to your company. You may be thinking, “Steve, there’s no way a subscription model works in my industry. It’s not how we do things, and plus, we’re a commodity.” That may be true…. In the past.

I always respond this way: “It’s because no one has thought of a subscription model yet that differentiates you from your competition (important) and resonates with your customers.”
It’s really that simple.

And here’s another truth. Buyers are mining the available companies for sale and hunting for companies where the majority of their revenue comes from a subscription model. Especially if that subscription model requires a low customer acquisition cost, is easy to onboard, has a high customer retention rate and lifetime customer value, and the holy grail – generates a positive cash flow engine.

The nice thing is there are nine subscription models we’ve researched that you can choose from. In our experience, understanding each and examples of each model helps you pick and choose from one or a variety to come up with a solution that works for you.
So, let’s get started. Here are the nine subscription models:

The Network Model

The more people that subscribe, the better the product to its subscribers

Companies

  • WhatsApp
  • World of Warcraft
  • Facebook (free, but you get the idea)

Best fit for businesses:

Companies heavily connected or highly capitalized
• You have a product of service that is better the more people join
• You can attract socially connected people who can spread the model
• You can offer a remarkable experience that people want to share

The Suprise Box Model

Specially curated products that subscribers are passionate about

Companies

  • SpicySubscriptions (for couples)
  • Trunk Club (men’s clothing)
  • BarkBox (dog treats)
  • Chewy.com (dog food)

Best fit for businesses:

  • A passionate, clearly defined market of customers
  • A large and diverse network of suppliers willing to give you a deep discount and one-time order fulfillment
  • Ability to deal with order management and logistics

The All-You-Can-Eat Library Model

Optimal when used in digital, online industries

Companies

  • Ancestry.com (family trees)
  • GameFly (video games)
  • Netflix (Movies/Video Game)
  • Lynda.com (training)

Best fit for businesses:

  • A library of evergreen content, or access to
  • A legion of existing fans (blog, Twitter, LinkedIn) who already consume your free content

The Private Club Model

Customers must choose a long-term subscription to gain access to something rare.

Companies

  • Joe Polish’s Genius Network ($25k/yr)
  • A “wisdom network” of investors, authors and entrepreneurs

Best fit for businesses:

  • Something of limited and highly sought-after supply
  • Almost always a service or experience that is in high demand from affluent customers
  • A market of achievement-oriented people always looking for the next best thing

The Front of the Line Subscription Model

Involves selling priority access to a group of your customers, and can be added to other models.

Companies

  • Salesforce.com “premier” support
  • PeachPass or Texpress (to bypass traffic jams)

Best fit for businesses:

  • A relatively complex product or service
  • Customers who are not overly price-sensitive
  • “Sticky” products and services with high switching costs
  • Customers for whom waiting in line can cause serious issues

The Membership Website Model

Exclusive access and insider information for one regular subscription payment.

Companies

  • The Wood Whisper Guild ($129/year)
  • Dream of Italy
  • Stanberry Research Newsletter
  • RestaurantOwner.com
  • ContractorSelling.com

Best fit for businesses:

  • That can help business owners master a specific industry or skill
  • A tightly defined, focused niche
  • That can provide ongoing insider information valuable to customers – think “must-have”
  • That can provide content in multiple formats
  • Related products and services you can sell to your subscribers

The Simplifier Model

Works well for personal services, because like you, everyone wants to simplify their life. In short…
Takes care of their to-dos.

Companies

  • Quarterly or semi-annual carpet cleaning, dog walking or grooming services
  • Hassle-Free Homes ($350/mo., 100-point inspection)

Best fit for businesses:

  • A service your customers need on a regular basis
  • The ability to sell to relatively affluent customers
  • A personal service business like the examples given, that people want or need but feel they “don’t have the time to do themselves”

The Consumables Model

People are willing to pay for convenience, offering products customers need on a regular basis.

  • Dollar Shave Club
  • Big Box eTailers

Best fit for businesses:

  • Something to sell that consumers run out of
  • Something to offer that is annoying to replenish
  • Something that people can receive in a “set it and forget it” fashion. It shows up when they need it.

The Peace of Mind Model

The serenity of knowing you are covered in the event of a catastrophe.

  • Warranty programs (roofs in Tornado and Hail Alley)
  • Pet Tracking Services like Tagg
  • Lojack Stolen Vehicle Recovery
  • Lifelock Identity Theft Protection

Best fit for businesses:

  • Offering the subscription to a handful of customers so you can get a sense of how claims are made (vital)
  • Limiting your customer offer (e.g., the roofing example – offering to cover repairs up to a certain amount)
  • A history of customer service calls, thus enabling you to predict the likelihood and frequency of a claim

TALK WITH AN EXPERT