Did you know that only half of all small businesses survive past their first five years? Here’s another scary fact – according to D&B, 90% of business failures are caused by cash flow issues.
While there are many reasons for cash flow problems, one of the most problematic areas for small businesses and freelancers is that business is often hard to predict. Sure you can monitor trends and perhaps build a pipeline, but for many businesses, knowing where your next client is coming from is impossible to gauge.
Consider this scenario. You’re a freelance web designer. You’ve established your value and build a modest client base. Projects come and go, but do you really know where the next one is coming from? The problem with this scenario is that freelancers and other service-based businesses, like auto repair shops or tax professionals, are often engaged for one-off work. Unless you are lucky to have a retainer or a guarantee from your clients that they’ll use you again, it can be hard to know where the next paycheck is coming from.
If you don’t have a clear pipeline or often worry about where your next job is coming from, then this is you.
So what are your options? Here are four ways to generate recurring revenue and create a more sustainable business:
Offer Maintenance or Subscription Plans
I recently used the services of my regular window cleaner company for the second time this year. While I typically give them a call and schedule as needed, the owner pulled out my file and reminded me how many times I’d used their services in the past two years and suggested I take out a maintenance plan. In doing so I could save 10% on this and my next service. The plan also gives me priority scheduling – they call me to schedule my spring service, so I don’t have to wait in line behind other clients.
By offering a maintenance plan, the benefits for the window cleaning company are clear – they receive an upfront payment for the maintenance plan, gain a sense of future demand to help plan staffing needs, and can probably count on the fact that I’ll renew the plan next year, thus bringing in recurring revenue.
Maintenance plans can work for almost any hands-on business, from computer repair stores (offer a yearly tune-up plan) to auto repair shops (provide customers with 6-month subscription plans that include oil changes and state inspections).
Upsell / Cross-sell
Businesses should always be looking for upsell and cross-sell opportunities. If you provide window cleaning services, could you also offer your loyal clients gutter cleaning or exterior power washing services? Freelancers or consultants could offer support beyond the original engagement. For example, if you provide accounting services, look for ways to become a trusted advisor and provide a wider scope of services – from helping out with payroll to providing a quarterly tune-up of your client’s financials.
Diversify your Seasonal Business
Business seasonality doesn’t just flow with the weather. Tax advisers, for example, experience an obvious seasonality. But so do freelancers, many of whom experience busier seasons early on in the calendar year when clients have new budgets approved. Year-end can also be busy as clients ramp-up spending in order to overcome the “use it or lose it” budget crunch.
Read these tips for overcoming business seasonality and play these fluctuations to your advantage.
Offer Warranty Plans
Extended warranties are a great way to generate recurring revenue. If you sell or service a product that would require great cost or hassle for your customers to replace, then warranties can make sense. Appliance repair companies, garage door installation companies, HVAC firms, tech manufacturers, and so on are great candidates for these plans. If your competitors offer warranties then you should too, but what should your warranty cover and what should it exclude? How long should it last? For answers, read Inc.com’s: 6 Questions to Ask Before Creating a Warranty.
Read these other articles for more ideas for boosting your recurring revenue: