Too little recurring revenue?
I want to tell you the number one reason why great business owners remain overloaded and stressed.
I’m Linda Feinholz. I work with business owners who are frustrated because they want a more stable and more scalable company and it’s not happening fast enough.
A year ago I’m at a workshop. Speaking and teaching a little bit on how to create a more stable, scalable and even sellable company. One of the business owners raises up her hand and says “I’m having trouble scaling and managing cash flow while doing it.”
Well that’s a real problem. She has a products based business and customers who come back when they need to replenish stock of some of her items. She may not face much seasonality, but too much of her business is unpredictable.
So there’s a book written a couple of years ago called The Automatic Customer. Technically, her solution was spelled out there.
There are 3 aspects to the solution we’ll call “Recurring Revenue”
The first one is your customers are passionately attached to buying from YOU.
The second one is they, too, want to smooth out their cash flow.
And the third one is they will pay for special access that only a ‘subscription’ will get them.
Let me use an example that illustrates it.
Whether or not you’re a motorcycle rider, you’ve probably seen a herd of riders going down the street together.
Well, back in the early 80s, Harley Davidson was struggling. Sales were flat. Cash was tight. And they were looking for a way to improve cash flow in their business. It’s a hugely capital intensive business with all the raw materials and labor that go into their products. Rubber and leather and metal and all the hard costs.
They realized that they had this small group of very passionate riders that loved Harley Davidson and everything that stood for.
And so what Harley Davidson decided to do was create the Harley Owners Group or “HOG”s, which was designed to harness this passion. Harley owners had for riding.
For example, they would publish area group rides. If there was a group ride going out of Sacramento, California, they would publish that, so anyone in that area could go with fellow Harley owners. Group members also got a discount on swag. So the leather bags and the jackets and the hats and so forth.
So they created this sort of culture. A million riders took them up on forty five dollars a year to become a member of the Harley Owners Group. COOL, right?
But what they also did was created forty five million dollars of free cash flow coming into Harley Davidson. So now you’ve got forty five million dollars of cash coming into the business without the typical hard costs associated with that level of sales. A small staff to manage the swag, the communications, and so on.
And it’s just one example of a company getting really creative about cash because again, the more cash you can get your company generating, the more valuable it will be to a prospective buyer.
Accounting services and coffee brands aren’t the only ones who can make this work. My client Dave Sr. ran a business plating parts used by manufacturers in the automotive and aerospace industries. By switching a portion of his contractual agreements from large P.O.s to monthly volumes he increased the predictability of his operations AND his cash flow. And held onto client relationships for longer spans of time.
More stable, more scalable.
John Warrillow goes into all the variations available to create recurring revenue in his book The Automatic Customer. If you want to get a quick summary of the 6 forms of recurring revenue, go to OnDay91.com/revenue . And if you’d like to share your ideas with other value building business owners, take a look at our Momentum Program for business owners who Don’t Want To Get Stuck In Their Business. You’ll find information about it at OnDay91.com/momentum .
And if you know business owners struggling with the same issues, this could be just what they’ve been looking for. So do share it with them. Let’s get as many people we can to stabilize their business with recurring revenue so they can scale up.
Thanks for sharing.
P.S. Whenever you’re ready… here are 4 ways we can help you stabilize and grow your business:
1. Grab a free copy of our Guide and Checklist
It’s the roadmap to creating a stable, scalable, valuable business that is so healthy you could be absent for ninety days and it would continue to thrive. — Click Here
2. Join the On Day 91 group and connect with business owners who are resetting and scaling too
It’s our new Facebook community where smart business owners learn to get more control of their business, value for their company, and freedom in how they use their time. — Click Here
3. Join our Momentum Program and be a Case Study
We’re putting together a new case study group at On Day 91 this month… stay tuned for details. If you’d like to work with Linda on your business-pivoting and growth plans… just send her a message with the words “Case Study”. — Click Here
4. Work with Linda and her team privately
If you’d like to work directly with Linda and the On Day 91 team to take you and your business to it’s next level… just send Linda a message and with the word “Private”… tell her a little about your business and what you’d like to work on together, and we’ll get you all the details! — Click Here