Many entrepreneurs struggle to be profitable because they don’t have a predictable monthly income. One of the best ways to create predictable monthly income is by implementing a monthly recurring revenue model in their business.
Join Jay on today’s Black Entrepreneur Blueprint podcast episode # 455 as he discusses the benefits of a monthly recurring revenue model and gives you five steps to implement it into your business along with several business ideas.
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BLACK ENTREPRENEUR BLUEPRINT SHOW NOTES – EPISODE # 455
What Is Monthly Recurring Revenue (MRR) or Subscription Revenue? – is the predictable total revenue generated by your business from all the active subscriptions in a particular month. It includes recurring charges from discounts, coupons, and recurring add-ons, but excludes one-time fees.
BENEFITS OF MRR
Predictable cash flow – allows you to predict how much money you’ll be making each month and forecast future months. This helps you with your strategic planning.
Automated payments – auto pay helps your customer retention since that doesn’t have to take out their credit card and make a payment each month.
Customer retention – subscription payments allow you to focus on customer experience to keep your customers happy.
Higher company valuation – Investors will value your company more if you have predictable and reliable revenue.
Growth potential/ Scaling – with predictable cash flow means that you can invest more money into scaling your business.
CONS OF MRR
Subscription hate – many customers don’t like subscriptions and will shy away from buying your product or service if they’re not completely sold on it. This model simply makes sense for some types of businesses, but for many others, it can push consumers away.
Converting existing customers to a subscription model – if you are making a change with your current customers, you may find opposition to transitioning them into a subscription model.
Churn – subscription cancellations are a part of the game, but if you start to lose more customers than you gain each month, you will have significant long-term issues for your business.
STEPS TO BUILD A MONTHLY RECURRING REVENUE MODEL
1 Commit to the business model – in order for you to make this work you have to make a commitment to see it through
2 Create an irresistible offer your ideal client can’t say no to – your offer has to be a no-brainer. You want your audience to feel silly if they don’t take the offer.
3 Create the right messaging – you need to craft a powerful, concise, and clear message that calls out your ideal client and draws them to you.
4 Make it easy to find you and buy from you – be where your customers are and make the purchase option simple
5 Deliver customer service – the quickest thing that will make you lose customers is your lack of service.
SEVERAL TYPES OF MONTHLY RECURRING REVENUE MODELS
Remember, there are only six things you can sell, you physical and digital products and your services, and somebody else’s physical and digital products and their services.
Physical product examples:
- Subscription box business – like “stitch fix” that’s an online personal styling service that sells a subscription box of close each month picked out specifically for you.
- Harry’s razors – has a subscription option for razors and shaving products that ship monthly
Digital product examples:
- Software as a service – (SaaS) is any software that is sold on a subscription basis. Many top software companies use this model such as Shopify, Lead Pages, QuickBooks, etc. You can create your own software or resell other people’s software and make MRR (like Dropfunnels.com)
- Online membership programs – you can create an online coaching program with monthly membership fees, you can also create an online membership directory where people pay to be listed on the platform and online access to online educational portals like www.BEBAcademy.com.
- Warranty/service plan – you can create a monthly plan for your other products with a warranty or service plan for a nominal monthly fee like a monthly service fee for your web designer to keep your site updated and running smoothly.
- Service retainer – you can have a monthly retainer for your services like a lawyer or a CPA