Almost twenty years ago, I bought a commercial cleaning business.
The beauty of the commercial cleaning business was a continual stream of income.
Every week I would clean offices that would become dirty the next day.
I didn’t realize at first how valuable this scenario was for me.
I had bought a business that had a built-in recurring revenue model.
I remember thinking about the cleaning business at the time.
When I wanted to make more money, all I had to do was visit office condo parks.
I went from office to office and shared with each of the businesses that I had a cleaning company and asked if they needed their offices cleaned.
As I thought about how much money I wanted the business to make, I reviewed how much money I was making each month.
At the time, I had three types of clients as follows:
- Offices that I cleaned once a month
- Offices that I cleaned one a week
- Offices that I cleaned multiple times a week
Then I imagined my monthly income goal as a glass of water.
The glass represented my monthly income target.
The level of water in the glass represented my current income level.
To put this in context.
Let’s say my monthly income target was $10,000.
Then let’s say my actual monthly income was $5,000.
In this case, my glass was half full (or some people would say my glass was half empty).
Then my next target was to add one client.
I knew that a new client would fill my sales glass up a bit more each month.
Then when I got another new client, my sales glass would be full a little bit more.
The beauty of the recurring revenue model was that my monthly income would be stable from month to month.
The only reason why my income would go down would be if the client relationship ended.
It was a powerful business lesson I learned at a relatively young age that recurring revenue is one of the best ways to build a business.
The best thing about the recurring revenue model was that I didn’t have to resell my clients on buying from me again.
They were going to continue to buy from me as long as they wanted their offices to be cleaned.
When I wanted to make more money, I just began marketing.
The lesson of recurring revenue became hardwired into my business brain.
About eight years later, I decided to open an accounting business.
The biggest reason why I decided to build an accounting business was because I wanted to have monthly recurring revenue.
I knew that monthly recurring revenue was the key to having a stable business.
At the time, I didn’t particularly like selling, so I saw a recurring income stream as a compelling enough reason to get myself out the door and face the rejection that is inherent in selling.
I kept reminding myself that every time I get a new client, I was filling my sales glass up.
This would get me closer to my goal.
As I expanded my services offerings, one of the things I always tried to consider was how can I make this sale a recurring revenue stream.
I even turned some of my annual tax return clients into monthly paying clients.
Here’s how I got monthly revenue from my tax return clients.
Assume my client paid me $600 to prepare a tax return. Then I would divide the $600 by 12 months.
By doing this, I was able to create a monthly income stream of $50.
By converting my clients from annual paying clients to monthly paying clients, I was able to smooth out my monthly income and become more stable.
Having a stable income reduces the stress that comes from erratic income streams.
I’ve worked with some clients where they are continually going through a feast and famine cycle.
One month they make a lot of money.
The next month they lose money.
It’s an unnerving way to run a business.
Their business ends up going up and down each month just like a yo-yo.
One of the biggest reasons why these businesses have yo-yo income is because they lack consistent sales and marketing processes.
Here’s what typically happens.
The business owner has some free time because they don’t have enough work.
They hustle and drum up a bunch of new work.
Then they get busy with all the new work they received.
They become too “busy” to continue their sales and marketing system, so they stop doing the one thing that generated all the work.
Then as work begins to slow down, the money starts to dry up.
Then the business owner starts to hustle, and the cycle repeats itself.
If you charted out their income, it would look like a saw tooth.
Until a change is made in the way the business operates, it will continue to have an up and down yo-yo income.
There will always be feast and famine.
The only way to overcome this is to build consistency.