It’s the ultimate dream, living the lifestyle you want because your business is on autopilot. Your subscription business model creates recurring revenue, which means you can relax, knowing you have a steady stream of income hitting your bank account.
Before you say that it sounds lovely, but it just doesn’t apply to your line of work or industry. You’d be surprised, subscription business models are opening up amazing new opportunities across all industries, and the time has come to re-examine the way you do business.
Truth be told, it doesn’t matter whether your business is 100% online, bricks and mortar or service based – there is a new economy emerging.
Gartner predicts that by 2023, 75 percent of organisations selling direct to consumers will offer subscription services.
Who is switching to the subscription model?
It’s not only the big behemoths like Amazon, Apple and Microsoft that have adopted subscription models. It’s more than likely you have recurring payments for at least one or a few combinations of newspapers, music, cloud storage, accounting software and video-streaming to name a few. While we’ve become familiar with the big multinationals and SaaS companies taking the lead, it’s a model that’s been accelerating at great speed across different industries and sectors. These days we can buy a subscription for everything from cases of wine to dog treats and kids craft packs!
So why are businesses tripping over themselves to introduce a subscription model into their business?
Businesses with recurring revenue have a double advantage.
Not only do they enjoy a steady, predictable stream of income, but this in turn impacts the value of the business.
Why? Because acquirers will pay a premium for the predictability of the income.
Forward-looking revenue models are powerful, you can plan your growth knowing that you have the income to support it. You can also discover much more about your customers and their behaviours and calculate your Customer Lifetime Value (CLV). These factors combine to reduce risk, something that is very appealing to investors.
Whether you are thinking about an exit strategy, or perhaps you just want to focus on growth – if you embed a subscription model into your business, you will be targeting ‘value driven growth’, that is the kind of growth that also contributes to increasing the value of your business.
In terms of business valuation, there are few things more important than recurring revenue.
It’s the best damn business model in the world… it’s got great predictability for planning, which helps you as an entrepreneur sleep at night.”
CEO & Co-founder, freshbooks.com
Not sure how to implement a subscription model in your business?
Stay tuned. In this series, we’ll outline 9 different models to drive recurring revenue. It will open your eyes to a number of different options that are working for other businesses.
As you read it, stop yourself from thinking, “That would never work in my industry”. Instead, choose to ask the questions, “How could this model apply to my industry?” and “What part of this model could I borrow for my company?”
You'll discover that subscription models can work in the most unlikely of businesses and industries. If you have an open mind, it could change the way you do business forever!
Keep an eye out for our next article where we’ll dive into the first model of recurring revenue – The Network Model.
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Understanding the 8 Drivers of Business Value
Today we’ve discussed Recurring Revenue, which is one of the 8 Drivers of Company Value.
Now you can also measure your business against all 8 of these Value Drivers and get an indication of what your business is worth today.
With that information, you can develop a clear plan to increase the value of your business. You'll not only find smarter ways to grow, you'll also be putting yourself in the best position to exit your business, when the time is right, for a premium price.
interested to know
what drives the value of your business?
We invite you to take the Value Builder Score.
This is a powerful bench-marking tool that rates your business against the 8 Key Drivers of Business Value. Over 45,000 business owners have now taken this assessment.
The Value Builder Score shows you what your business looks like through the eyes of an acquirer. You'll discover what's silently dragging down the value of your business, or whether you have untapped hidden assets with the potential to increase value.
The great thing is, there's no cost to take your score and it only takes about 10 minutes to complete.
What you'll discover
- 1Ways to make your business more valuable than your industry peers
- 2How to spot your company's hidden assets or silent killers
- 3Where you are now, where you need to be, and how to achieve the business valuation of your dreams
CEO and Founder, Exit Advisory Group
If you would prefer to reach our directly, I would love to start a conversation. Connect with me and send me a message on LinkedIn, or get in touch any of the ways below. Old fashion phone calls are also welcomed!
At Exit Advisory Group we help entrepreneurs maximise company value and exit at the top of their game.
We do this by giving business owners the tools and strategies to design more profitable, efficient and enjoyable businesses to own - that are also less dependent on them. When they choose to exit, they are in the best position to unlock the wealth in their business and be rewarded for their hard work.
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