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Recurring revenue: the new frontier

Changing your business model can open up new markets and new revenues. One of the easiest ways of doing this is to focus on growing your recurring revenue. Subscription or usage-based models are now being used in many new different sectors, e.g. heavy manufacturing and medical devices.

A survey of senior finance executives by CFO Research, in collaboration with Salesforce, showed recurring revenue models are well established and growing. More than half (53%) of the CFO Research/Salesforce survey respondents said at least 40% of their organizations’ revenues were recurring, that is, sold via a subscription- or usage-based model:

Source & Copyright©2019 - CFO Research

Recurring revenues are important because the:

  • Initial sale is the starting point offering numerous opportunities to upsell
  • The seller receives multiple payments over the products life instead of a single payment
  • Are steadier and less likely to suffer major changes.

These advantages are becoming increasingly well understood, but how do you exploit them, overcome the obstacles to increase recurring revenue?

Overcoming the obstacles

CFO’s research showed that companies launching a recurring revenue product found many had operational problems:

  • How to process, track and manage the revenues
  • No tools to manage the process
  • Using the wrong metrics to manage the business
  • Calculating and managing prices
  • How to record the revenues
  • Cultural shift needed both operationally and in the salesforce.

Subscription success

Recurly, in their “Seven Strategies for Subscription Success’  recommend that companies need to:

  • Combat subscription fatigue by going the extra mile to ensure subscriber satisfaction
  • Gain a 360-degree view of subscribers, and deepen subscriber insights, by sharing data across systems
  • Boost flexibility in processing payments through custom gateway routing
  • Increase pricing and packaging options, and encourage adoption, through flexible billing terms
  • Recover more revenue and reduce involuntary churn with retry strategies powered by machine learning
  • Consider "hybrid" billing models to combat increasing competition
  • Reduce friction at checkout through improvements to the checkout process.

BlueSnap in their CTMfile Checklist recommend, for consumers and SMEs, companies use multi-payment so they can pay by their preferred method. 

CTMfile take: Recurring/subscription payments can change your business model and open up whole new revenue streams.

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