Recession proof your business with recurring revenue

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Recession proof your business with recurring revenue

There's plenty of doom and gloom surrounding the current economic environment and if we were to believe the media then we are either experiencing a slow down or we are on the brink of a global recession. It's likely that the truth lies somewhere in between. What is without doubt is that 2008 is going to bring a new round of challenges to small and medium business.

New research from an entrepreneur think tank reveals that 38 per cent of small companies do not have any plans in place to offset the potential business risks.

The biggest threats to SME success were seen as competition (20%) time and money spent on dealing with red tape (19%) and the inability to hire the right people (19%). In addition concerns about generating new business and potential problems securing finance were also likely to cause sleepless nights with 13% citing these are the biggest risks for 2008.

When it comes to seeking finance the answer is almost certainly to seek independent financial advice from a specialist who has access to a wider pool of potential lenders. And whist this article may not be able to allay fears or offer any insights into cutting through the red tape or assisting with your hiring and firing issues it may be able to offer some ideas about generating new business and staying ahead of the competition.

We've all heard the adage about how much more expensive it is to find a new customer than it is to hold onto the ones you've got but few business owners do anything about it - especially when business is booming.

But business may not be booming in 2008 so it's important to turn your focus inward and find ways to edge ahead of your competition - now. One of the most powerful ways to do that is by delivering impeccable service and finding opportunities in your business to create recurring revenue.

Recurring revenue as the name would suggest is revenue that is continuously generated throughout the year and doesn't need to be chased by a sales team. Instead of viewing your business as a series of one-off sales is there any way that you can incorporate a recurring element to your offering. This not only offers you the opportunity to balance out your cash flow and make more accurate projections but it also fosters a long term approach with your customer. If you view your customer as a one-off purchase then your attitude and duty of care may well be different than if you view every customer as the start of a relationship.

Say you have a plumbing business and most of your work comes from word of mouth or the yellow pages. You never really know one month to the next how busy you'll be. After all no one plans for burst pipes! By offering your customers an annual review service where you check their plumbing system you ensure that your customers remember you and you offer a useful service by helping people avoid the costly and distressing scenario of faulty plumbing. And if there comes a time the review highlights something that needs to be fixed who is most likely to get that work? You. You could even add a little extra to this service for a priority call out provision.

Obviously you'd have to ensure your promises were possible however most businesses have potential recurring revenue steams. How could you create revenue streams that currently don't exist in your business? If you were an electrician you could offer a six monthly safety check where an experienced technician would come to your home and check all the smoke alarms and provide an energy efficiency breakdown.

Or what about information - does your business have specialist information that you could make available to your customer base for a small fee.

Sometimes it's easy to fall into the trap of doing business the same way because it's "always worked in the past". But the businesses that will survive and prosper into the future are the ones that are constantly evolving and thinking a little differently about what their customers need and want and finding ways to meet those demands.