Are you interested in creating your very own recurring revenue business? We’ve got you covered. In this article we are going to tell you everything you need to know so you can get started.
A recurring revenue business is the future for making income on a regular basis from customers. The hype is real.
Think increased revenue. Loyal customers. And predictable income.
Sounds nice? Keep reading. This article just might change your life.
We’ll explain what a recurring revenue business is, and the different types you can choose from. This guide should give you a good idea of how to start your own recurring revenue business. And help you pick a path well suited for your lifestyle and the products you want to sell.
- What is Recurring Revenue?
- What is a Recurring Revenue Business?
- 12 Recurring Revenue Business Ideas
- A Recurring Revenue Business is the Future
- Recurring Revenue Business Benefits
- How to Make a Recurring Revenue Business
- Best App for Recurring Revenue Business
What is recurring revenue?
Recurring Revenue is making money on a repeat basis automatically.
Recurring revenue is produced by getting customers who are buying your products on a subscription basis where there is no definite end.
These are also known as “forever transactions” and they help you create long, lasting relationships with your customers.
- Money earned repeatedly like month over month or on a quarterly/annual schedule
- Created by selling products or services which are used on an on-going basis
- Helps you have predictable revenue which shouldn’t fluctuate too much
- Earned usually through selling repeat orders like subscriptions
- Think of it as repeat income
What is a recurring revenue business?
A recurring revenue business is any company which makes money on a recurring basis.
In other words, these companies have money flowing in from products or services they sell on a repeat basis.
These recurring revenue businesses accept & offer recurring deliveries, which means their customers are making repeat orders. And these repeat orders creates repeat income.
Repeat Orders → Repeat Deliveries → Repeat Charges → Recurring Revenue
12 Recurring Revenue Business Ideas
1) Sell Refill Product Subscription
You can sell a physical product on your online store as a subscription.
Selling a product people use all the time and need refills on can help you create a recurring revenue stream.
A physical product could be soap, razors, dog food, coffee, toothbrushes, or pretty much anything people need to replenish.
If you think people would like to order your product on a frequent basis (or more than once) you can offer it as a subscription product.
Example: Outlaw Soaps really know how to sell subscription products. They make the process fun, it’s like giving yourself a gift every month. They offer a monthly subscription box filled with soaps. We like their plain and simple approach along with fantastic product photos which make the soap look so pretty. You can almost smell them! Outlaw Soaps also holds giveaways for their subscription box which helps spread awareness on social media about this product option.
2) Create a Subscription Box
Another option for selling physical products is to create a subscription box.
A subscription box is a box filled with curated products, usually hand-picked. These products can be small batch, artisanal, or just fit into a specific niche.
If you plan to start your own subscription box, we recommend choosing a niche when launching a subscription business. A niche is a small group of passionate folks interested in a topic.
Customers who sign up for a Subscription box, commit to buying them on a regular set interval. For example, weekly, monthly, or quarterly. This helps bring in cash flow regularly since customers are billed for every delivery.
The customer gets regular deliveries of the subscription product, but they are also being billed on a regular repeat basis. The repeat billing is what creates recurring revenue.
Example: Owl Crate offers a monthly subscription box for young adults. They include lots of goodies like a handwritten letter from the author and collectible surprises. We love how they make their entire website geared towards subscribing to their box. Their subscription box is so popular there is actually a wait-list! We think it’s clever they let shoppers take a peak a past boxes. This helps customers get an idea of what to expect and gives them a better idea of what will be included in their box.
3) Create a Membership Site
Membership sites are websites granting access only to customers paying a recurring fee.
These membership websites are typically “gated” which means the content is blocked if you are not a member. This member-only access encourages non-members to subscribe to the membership option so they can view content. Usually there is a login.
A membership website is a great way to create recurring revenue because members pay a monthly or annual fee. Members usually get extra perks like exclusive deals, first dibs on new products, and freebies.
Membership websites are perfect for a company that has content they don’t want to give away for free. It’s a great route if you have a service customers want to use all the time or on a frequent basis.
Example: Thrive Market is a membership website selling healthy food for a discounted price and deliveries it to your door. People who don’t have a membership can’t buy their food products.
If you do pay for a $60 dollar membership per year, you get access to health food products discounted to as much as 80% and free shipping for orders over $45. Their membership is recurring and charges the customer automatically every year. Subscription perks include freebie surprises with almost every order.
4.) Sell SaSS (Software as a Service)
Software is a program used by your computer.
A subscription software service is a little different than selling a physical product. Instead of selling a product you can touch and feel, you are selling a service people use on a frequent basis.
If you offer a service folks want to use on a recurring basis, then they will want to subscribe to that service. Selling subscription as a service can help create recurring revenue for your business.
How? By charging a monthly or annual fee.
A recurring revenue business which is also a SaSS company, is most likely creating software people find valuable. Software services serve a purpose. They benefit people’s lives, and offer convenience.
Example: Adobe Creative Cloud is a great example of a SaSS app. Their most popular program is Photoshop, which you’ve probably heard of. They sell software you can use on your computer no matter where in the world you live. By paying a monthly or annual subscription fee, you can get access to this art software just by downloading it. Thanks to advances in cloud technology, this company can run 100% digitally online without any clunky, mail order CD-disks.
5) Create an Affiliate Program
An affiliate program is when a merchant pays the you to sell their product or service. You would earn commission (either percentage of the total sale or a fixed price payout).
For example, if a subscription box company had an affiliate program, they could ask people to become an ambassador. An ambassador would market the company to their followers and email list.
Every sale the ambassador makes, they would get a cut of the profits earned.
Since this would be a repeat purchase with subscriptions, the ambassador would make recurring revenue every time customers subscription plan renews.
Example: Shopify has an affiliate program where they let a “partner” create an affiliate link. This link is then added to your website and tells people about Shopify’s free 14 day free trial. If someone clicks on the link and signs up for a paid account, Shopify pays out a commission to the person (who is called the “affiliate”).
6) Sell Online Courses
There is always a demand for online video courses, especially evergreen ones. Evergreen courses mean they will always be up to date and relevant.
You can sell online courses on something you are knowledgeable about like a skill you have or a passion.
If you create per-recorded content like videos and upload them to a website, you can create recurring revenue whenever someone pays to watch your courses. If you charge your customers an on-going fee to access these videos, then you will be earning money on a regular basis.
These ongoing fees are called recurring payments, and they are powerful.
In a way, selling online courses is similar to a membership site because only members will be able to access the video content.
Example: Boho Beautiful is a yoga platform ran by the gorgeous traveling duo Mark & Juliana. They sell online yoga courses on their app. These yoga videos are only available if you pay a monthly or annual fee. The subscription plan lets you access any video anytime, anywhere. Selling online courses gives people a valuable and helpful lesson in whatever topic they are interested in. It’s a great way to create positive change in the world through education and training.
7) Digital Downloads Access
Digital downloads are a great product to offer subscriptions on.
They let the merchant sell digital inventory which has lower overhead than physical inventory.
There are lots of different types of digital products people can sell from templates, to themes, to even patterns and stock photos or videos.
Digital downloads can be sold on a monthly basis for a recurring fee. Usually digital asset websites put a limit to how much the customer can download in a period.
This helps prevent users from abusing the websites access to content and downloading everything and then leaving before the free trial ends, or just having a subscription for a single month and canceling.
Example: ShutterStock sells photos online. These digital files can be downloaded with one click. They sell a subscription plan costing $29 per month which gives you access to downloading 10 images. This company also offers a one month free trial which helps encourage the customer to subscribe. After the free trial ends, the customer would be charged automatically for their subscription plan.
8) Subscription Service
A subscription service is any website offering a membership or subscription to their services.
Subscription services usually offer a benefit to the customer for a monthly or recurring fee.
The idea is to bring value to the lives of their customers.
Saving them time, offering convenience, or simply just giving them something they need or want. Subscription services can be offered on a desktop computer website or on a mobile app these days.
By signing up for a subscription, the customer is agreeing to be charged on a recurring basis. These Automatic payments are debited from their account on a regular basis.
Example: Instacart offers grocery delivered to the customers doorstep in exchange for paying a yearly or monthly fee. They call this subscription service Instacart Express. Instead of paying for deliveries a la cart, they can save their time by paying for a subscription to use this app.
9) Food Subscriptions
This could fall under subscription box, but we want to shine a light on food subscriptions because they are so special.
Remember this could be for humans or animals.
Pets are a huge market these days for subscription products.
Food subscriptions are super popular because they are consumables. This means they are eaten, and the person wants more of it. It could be a luxury item like comfort food or it could be a pantry item. Pantry items tend to do better since people can’t live without these items. Think necessities.
Food subscriptions are a great way to get your customers
Example: Chewy is a website selling dog and cat food as a subscription service. They offer an “ongoing orders.” This helps folks order the products they buy for their pets on a regular basis and saves them a trip to the pet-store. They offer an AutoShip which lets the customer set it and forget it. They simply select the products they want delivered on an on-going basis and are charged automatically.
10) Service Plans
If your company has services they provide to other people on a regular basis, a service plan can be a great option for generating recurring revenue.
These are usually referred to as a retainer and basically they let the customer pay upfront for services rendered.
This can be on a subscription type basis. Let me give you an example.
Say there is a design agency and their clients required a website refresh on a regular basis. This company could charge a monthly or annual fee to have this maintained for them. Similarly, an SEO company could also charge a recurring fee for on-going work done on a client’s website. See below.
Example: Get Clicked SEO is a Shopify app helping merchants optimize their online store so they can appear better in Google Search Results. Get Clicked SEO offers a monthly subscription plan to users. The monthly fee helps these Shopify store owners stay on top of their search engine optimization.
11) Private Club or Association
A private club like a Country club can sell you a recurring fee for being a member. This is a type of subscription. Call it old fashioned, but it’s still used to-this-day because it’s effective.
This recurring revenue business model applies to physical clubs and locations like gyms, cigar lounge, spas and country clubs to name a few. These are typically referred to as “member dues.”
Example: Costco is probably the best type of example. This grocery store is more like a warehouse and sells bulk items to customer. However, you can’t shop there unless you pay a yearly fee! Members are given a card which they present at the front entrance before being allowed to shop. Only members can shop on their online store. Last time I was shopping in Costco, they gave me a free coffee thermos for “auto renewing” my membership. Why? Because Costco knows the power of recurring revenue.
12) Subscription Combination
If you have a membership on your website and you also sell subscription products, this is considered a combination.
An example of this is if you offer AutoShip which sometimes is a yearly subscription cost to get free shipping on recurring orders.
The company will still ship out products with scheduled deliveries like a normal subscription company, but there is a membership fee as well.
Example: Amazon Prime let’s customers pay for a yearly membership so they can subscribe and save to the products they love. That means free shipping. And less headaches. If you need something delivered on a weekly or monthly basis like bread, milk, eggs, and cereal, they can schedule these deliveries for you on a recurring basis. This membership access combined with physical product deliveries is a clever new way subscription companies are gaining more revenue.
Recurring Revenue Business = Future
The future of ecommerce is in subscriptions.
Maybe you’ve heard the subscription economy is booming, and that’s true. it really is.
It’s not a fad. Or a trend that will be gone tomorrow. It’s here to stay. And will only become more and more popular.
It’s going to be a requirement for online stores. Not having subscription payments is like going to be like not accepting credit cards. Ongoing deliveries is the new normal.
There’s already been a switch in shopping behavior. A real change in consumer habits.
The subscription ecommerce market is projected to reach $473 billion by 2025.-Shopify
People want convenience. And automatic deliveries. Folks don’t want to leave their couch or desks. They want things now. Actually they needed that thing they ordered yesterday.
They expect Autopay and they demand peace of mind. Subscriptions gives them all of this.
It also gives the merchant the ability to earn recurring revenue. Businesses who implement recurring revenue models are going to grow faster, and outpace their competitors. It’s a fact.
Recurring Revenue Business Benefits
✅ Predictable Recurring Income
Wouldn’t it be great to be able to know how much you’re going to make next month? Well, with a recurring revenue business, you are able to do this. Since subscriptions earn pretty much the same amount every month, it’s easy to calculate how much next month’s income will be. It would be similar to the current month. If you are growing and have a low churn rate (i.e. not a lot of people cancelling their subscriptions), then you will make more money.
✅ More Cash Flow on Hand
If you are selling subscription products, you can become a recurring revenue business. All you have to do is make some sales! By having money coming in on a regular basis, you will be able to have more cash on hand. There is also an option to sell Prepaid subscriptions. This gives the merchant a larger upfront payment for their products, again giving you more cash on hand.
✅ Easier to Manage Inventory
If you have a subscription product, it’s going to be easier to manage inventory because you’ll most likely have less products. Having a shorter list of products you focus on building and growing a market for is going to benefit you. If lets you as a merchant spend more time on making these products better, and on marketing efforts to get the word out about your company.
✅ Loyal Customers
Subscribers are your fans. They are your loyal followers who are excited about your latest product launch. They are the ones who line up for a sale. Your loyal customers are ready to buy your latest product so make sure not to ignore your current customer base.
✅ Opportunity to Up-Sell
Your customers who purchased a subscription believe in your company. They are committed to receiving your products on a regular basis and giving you money. These are the folks you need to pay attention to. Show your current customers some love. Your current customers are easier to up-sell to because they already are familiar with your brand and love your products. So sell to them.
How to Make a Recurring Revenue Business
If you currently have an existing company and want to pivot towards a recurring revenue business, you’ll need to figure out the best approach for the transition.
Most people’s first impulse is to go all in. We recommend starting slowly.
Try one subscription product. This way, you can see how one product performs and if it goes well, you can add more subscription products.
If however, you are starting fresh, and don’t currently have a company…that’s great too! We recommend trying a free 14 day trial with Shopify to set your own online store. This is a great way to get a feel for having an ecommerce website and selling products online without a huge commitment.
Create a loose plan. And start! Nothing is going to be perfect, so make sure not to overthink it.
Best Recurring Revenue Business App
If you are looking into getting into the subscriptions space, we’ve got you covered. You’ll need an app to sell subscriptions and manage your recurring billing.
The best subscriptions app for Shopify is Ongoing
Ongoing lets you turn any product into a subscription which can earn your recurring revenue.
Your customers will be able to choose from available subscription plans and be billed on a regular basis automatically.
Ongoing app also handles subscription tracking, email customer notifications, and offers subscribers their very own customer portal to manage orders.
Recurring Revenue Business Recap
Now that you’ve heard all of the different types of recurring revenue business ideas out there, you can make your own.
We recommend starting with a sheet of paper and pen and writing down your ideas of what you want to pursue.
This is the best way to get the brain juices flowing and creativity up-charged.
It’s never to late to start turning your existing company into a recurring revenue business. You’ll be happy you did. The payoff is definitely worth the effort you put into it.
Good luck on your journey to creating your very own recurring revenue business!