How to Increase Profits and Cash with Recurring Revenue

 

In my last blog post, I took you through 7 benefits of recurring subscriptions. Check it out if you missed it. Now, let’s look at how we can implement recurring subscriptions into our businesses as accountants and bookkeepers.

Bear in mind, of course, that to some extent we are already doing this. 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.

 

 

Starting simple: Getting paid monthly in advance

 

Think about any service that you currently offer to your clients which is recurring. Perhaps that’s something you typically do once a year and get paid once a year for, for example, the end of year annual financial statements. What if instead, your clients agreed to a price upfront for the following year’s work and then paid you every single month? If you can get your clients to pay you every single month for those annual recurring jobs, you are turning annual recurring revenue into monthly recurring revenue. That’s going to really help with those predictable cash flows.

 

The way that many people in the Value Pricing Academy are doing this is by collecting the money in advance. By the time they’ve done the annual financial statements, they have all the money. Rather than sending out an invoice and adding to their balance sheets, debtors or accounts receivable, they now have a negative number because they’re getting the cash before they do the work.

 

That’s the first thing that you can do: if you have annually recurring work where you get paid annually, figure out how you can change that model so that your clients pay you monthly in advance. And remember, clients will love to do that, because it makes life easier for them. They can set up a direct debit or ACH and then forget about it.

 

 

Building a retainer arrangement

 

To take this to another level, you could think about a retainer arrangement where clients pay you a monthly subscription fee to have access to you and your firm. The reason clients want to work with great accounting firms is that they know they can contact you if they have issues and want help with something. There’s real value in knowing that they can pick up the phone or come and see you whenever they want.

 

Think of your accounting firm as a membership club, just like a golf club. With a golf club, people pay a membership to have access to the club and its facilities. They can then go and play golf whenever they want to, but they must have paid the membership first to have that access. Why can’t we do the same thing? The thought process you have to go through is, ‘What can I do to make my firm feel more exclusive? How can I add some more value? How can I make it so that people would want to pay a subscription?’

How can you build in extra benefits so that clients will happily pay a subscription fee? Could you offer for clients to have the benefit of unlimited access to you and your firm? Perhaps a monthly newsletter? A tax planning update every year? These might be things you do anyway for free but are really valuable benefits.

 

 

Running a business club

 

The third thing you can do is think about running a business club. If you like the idea of doing business advisory and helping your clients to build more successful businesses, then you could of course run a one-to-one business advisory service where they pay you a fee and you work with them every month on business advice.

 

But what about if you scale that? What if once a month you got 10 clients together to hear you give advice? They would also get the added value of networking with other business owners that you’ve got together and provided a space for. They could get so much value from hearing your advice and getting to ask you questions directly that they could be willing to pay $270 a month. 10 clients paying $270 a month is $32,400 annually, and the only cost to you is half a day a month of your time where you share your content. That’s all extra profit for your business.

 

This model is scalable because those 10 people could grow to 20 over the course of a year, or even more. What’s interesting about this model is that your costs won’t change. Unlike working one-to-one where if you want to double the number of clients you’re working with, you have to double the amount of time you spend too or hire more people, with this scalable model it’s the same time and effort whether you’re teaching 10 people or 100 people. As you know if you’re part of the Value Pricing Academy, that’s my business model, and you can do the same thing.

 

 

Final thoughts

 

As we’ve seen, the opportunity to increase profits through recurring revenue is huge, but there are a couple of things to be aware of. As you move down the route of a subscription-based business, there are a bunch of new metrics that we need to be aware of and learning.

When you build a subscription-based business, whether you decide to have a retainer, or build a business club, you need to be starting to measure things like MRR. That's Monthly Recurring Revenue. You also need to measure ARR (Annual Recurring Revenue), LTV, (Lifetime Value of a customer), and CAC (Customer Acquisition Costs). Plus, one final important thing to be aware of and measure is Churn. That’s the percentage of people that leave the subscription, because that’s a big issue you need be aware of and try to minimise.

 

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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