The 7 Benefits of Recurring Subscriptions

 

This blog post is all about how we can increase our profits and the value of our firms using recurring revenue. This is a huge opportunity that the most successful businesses around the world are already taking advantage of. Plus, it’s a topic close to my heart because my entire business has been built around it for the past 18 years.

 

To some extent as a profession, we already have an element of recurring revenue. One of the great things about our business is, when you win a client for compliance services, whether that’s bookkeeping, annual financial statements, advisory work, tax returns etc., the great news is, that client will usually come back next year and the year after that. They tend to stay with us.

We are fortunate in some respects that we have that recurring revenue. But there are some other levels that we can take this to to really make the most of this opportunity.

Imagine you have 100 clients. What if you could find a way for each and every one of them to pay you a recurring subscription every month of $27? That adds up to an extra $32,400 per annum. If we’re creative about how we add value to our clients, they will willingly choose to pay us that extra $27 a month.

 

 

The Benefits of Recurring Subscriptions

 

First, let’s think about what the benefits of recurring subscriptions are, for both you and for your clients.

 

 

#1 – Predictable Revenue

 

Recurring work gives you predictable revenue. It gives you a steady cash flow and it allows you to predict your revenue.

This is great because we tend to find there are peaks and troughs in our income throughout the year due to things like the busy tax season and quieter holiday periods. This can mean we have very unpredictable revenue. I found in my own accounting firm back in the 1990s that I was constantly chasing clients for cash to fill in those gaps where revenue was dropping, but I still had salaries to pay, and I used to struggle.

 

Compare to where I am today, I would estimate that at least 95% of my business is built on recurring revenue. I know with 95% certainty what my revenue will be next month and so on. Recurring revenue gives you steady cash flows.

It’s also easier for me because most of my outgoings are recurring as well, as increasingly we find ourselves in this subscription economy. I can predict for much of the rest of the year with a fairly high degree of accuracy my incomings and outcomings.

 

 

#2 – Automate the collection of cash

 

With recurring revenue, we can also automate the collection of cash using things like direct debit in the UK, or ACH in the US.

Again, if I think back to my firm in the 1990s, I was so scared of the pricing conversation and I would send clients an itemised bill after with 14 days to pay. Frequently I would wait those 14 days and still not have been paid. I spent so much time chasing money.

 

 

#3 – Increase the value of your firm

 

One of the things that impacts on the value of a business more than anything else is the extent to which you have recurring revenue. When you have recurring revenue, people will pay a higher price.

 

 

#4 – Free up time to focus on adding value

 

When you automate cash coming into your business, you don’t need to stress about chasing money, chasing new clients, or chasing work. Once you have that certainty, you can spend more time focusing on adding value to your clients.

In my case, I run the Value Pricing Academy, and because I don’t have to chase money, I can spend my time thinking about ways I can create more value, create more training, and more resources. I can focus on doing the stuff I love to do.

 

 

#5 – Your clients like to pay by subscription

 

There are some really big benefits to you when you create recurring revenue streams. But on the other side of the equation, you’re also benefiting your clients, because people like to pay by subscription.

Paying by subscription makes our lives easier. We don’t have to worry about remembering to buy something over and over again, it’s already sorted for us. We pay a subscription for Netflix because we know that if we want to watch some great TV, it’s there available for us whenever we want.

 

 

#6 – Lessening the payment pain

 

We learn from price psychology that there’s something called ‘Payment Pain’ – people don’t like to take money out of their pocket and hand it over. The act of handling cash reminds us that we are giving away money, which is why we prefer to buy things on a credit card because it doesn’t feel like real money.

In a similar way, setting up recurring payments means we don’t have to worry about them. We don’t see the money coming out of our pocket, so we don’t feel the pain.

 

 

#7 – Top companies shift to the subscription model

 

As I mentioned, the world has been shifting to a subscription-based economy, and there are so many examples of companies that have started incorporating subscriptions into their business model.

Take Microsoft 365 for example, they used to sell software as an individual product. Now they were slow to take up the subscription model, but Microsoft now works as a subscription service.

Think about Apple. Apple knows that the future of the company isn’t in selling iPhones, because they’re going to saturate the market. That’s why Apple have started Apple Music and other subscriptions. Amazon’s another great example; the amount of money that Amazon makes from Amazon Prime is extraordinary.

Even products like razors, dishwasher tablets, and beauty products, you can find subscription services for. Because subscriptions take away all the stress and hassle of having to remember to buy things multiple times.

 

 

Those were 7 of the benefits of subscription-based recurring revenue. In my next blog post, I’ll take you through how we can start to incorporate recurring revenue into our businesses as accountants and bookkeepers.

 

Click here to watch the full video on this topic.

 


 

If you found this valuable and would like to learn more about value pricing, I run a free live online training session every month with a topic chosen by you. Attend live and you can ask me any questions you have. Click here to register and I will send you an invitation to the next session.

 

Wishing you every success on your pricing journey

 

Mark Wickersham

 

Chartered Accountant, Public Speaker and Author of Amazon No.1 Best Seller “Effective Pricing for Accountants”

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