Freedom. If you are anything like me, It’s likely that you decided to go into business for yourself in order to gain freedom. But freedom from what exactly–your boss, your schedule, financial bondage? This is something only you know, but freedom in small business is actually a rare occurrence.
I started this company in late 2015, with the hopes of one day taking it full time. I currently still work a full-time job, and that’s okay! I enjoy my job and the people I work with. But like you, I want freedom–freedom that a 9-5 usually just does not offer.
One of the things helping me move closer to that reality is recurring (or residual) income. But not only is it helping me–without it, my business could fail. And I think if you took an honest look at things, yours could too.
I mentioned earlier that freedom is a rare occurrence.
Here’s what I mean:
Often times, people go into business for themselves expecting to make their own schedules and spend less time working. But, they fail to realize the extra effort that goes into not only doing the work but acquiring new customers to work for! This may look different for you if you sell products, but the majority of my customers, as service-based businesses, can definitely resonate with this.
The small businesses with the best chance of succeeding also happen to be run by owners with the best chance of achieving the freedom they so desire. Yes–it’s the ones who have successfully implemented a recurring income strategy.
In the future, we will look at some ways to design and implement such a strategy, but for now, I want to highlight just three reasons why your business could fail without recurring income.
#1. Referral Business is Not Always Predictable
Many small businesses (and freelancers) thrive on referrals. Historically speaking, this has been the bread and butter that keeps most businesses churning. But something interesting (and truthfully, quite ironic) has happened in our culture. Despite more opportunities than ever to communicate with others, we often find ourselves unwilling to go out of the way to recommend someone.
There could be multiple reasons for this:
- Higher expectations. Everything is so accessible these days that companies would have to go almost unnaturally out of the way to make a significant impression. I’m not saying that this shouldn’t be the aim, but that doesn’t change the reality of the challenge.
- Reputation. Everyone is so concerned with how others think about and perceive them that they are afraid to share their opinion, especially when a financial decision may be involved.
- Laziness. Hey let’s just face the facts–were lazier and more self-serving than ever, in general! Many of us don’t care that someone else gets the help they need, as long as our needs have been satisfied.
There are other reasons I’m sure. Some warranted, and some ridiculous. Either way, the truth still stands–it’s hard for a business to succeed on referrals alone.
Of course, there are always exceptions to the rule.
If your business is less than five years old and thriving on referrals, you are the exception, not the rule. Furthermore, you should probably open up another income stream and teach your methodology to others!
Referrals are great, and sure, we get them from time to time. But they are not the bread and butter of our business, and it’s likely they won’t be for yours either.
#2. Recurring Income Stabilizes Market Fluctuations
One of the country’s leading financial voices often tells the story of buying eight investment homes, on credit, in early 2008. Many of you know exactly what that means–he lost everything. The housing market crashed, and these bad decisions led to years of hardship.
Though we are all in different businesses, there are only some that are recession proof. And in an economic downturn, you will wish you had a recurring income strategy.
Here’s why: Recurring income customers are likely to hang around since they are already paying for the services you offer.
Even if some of them don’t stay, you should have been using your recurring income to build an emergency fund to plan for times just like this.
While other small businesses are struggling to see new customers come in the door and are barely surviving, you could be thriving.
Bonus Tip: If you want to keep customers coming through the door even in an economic downturn, start working on a thought leadership content strategy now. When times get tough, you can begin to shift your message to help those in need. You will become a beacon of hope.
#3. Recurring Income Shifts Your Focus Toward Current Customers
Finally, but perhaps most importantly, the recurring income model allows for a complete paradigm shift in your business. So many small, service-based businesses are focused on getting new leads and customers. And, this is not always a bad thing.
After all, the whole point of our services is to help folks like you get those new customers!
But the problem is that the more time you personally spend on getting new leads in the door is time that is taken away from customers who are already paying you!
If your pricing is right, the recurring income model should give you the freedom to give those customers the best you have to offer. Meaning as new developments arise and you get better at your craft, those customers should reap the benefits.
Nothing makes a customer feel more valued than when you pay attention to them after the sale. Spend time working with your current set of customers and provide them ongoing value–you won’t be sorry you did.
Interestingly, THIS is the kind of value necessary for your referrals to pick up. See what is happening? By shifting your business model to one that takes care of your current customers FIRST, your marketing and lead generation load actually gets lighter!
This is the ultimate win-win for your small business.
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Question: How has recurring income transformed your small business, and what advice could you give newcomers?