In our experience of building, growing and also turning around businesses, a change of business model and especially a shift to recurring revenues is a bit of a silver bullet. A second observation is that lots of “growth consultancies” aren’t very good at, err, growing their own businesses. Rather like the builder with the scruffy house and the hairdresser with the bad haircut.
Some of the benefits associated with making this transition:
- Much more predictable cashflow
- From this, the ability to plan your own business growth
- Services that create recurring revenues drive and need longer term contracts
- Extended and deeper client relationships
Shifting to a recurring revenue model as a consultant is a strategic move. Here are some steps to make this transition smoothly:
1. Assess Your Services
- Identify services suitable for subscription: Review the services you currently offer and determine which ones can be adapted to a recurring model. Consider services that clients need on an ongoing basis, such as monthly analytics reports, continuous market research, or regular strategy sessions.
- Bundle services: Combine complementary services into packages that can be offered on a subscription basis. This approach can provide more value to your clients and encourage them to commit to a recurring plan.
2. Define Your Offerings
- Create tiered packages: Develop different levels of service (e.g., basic, premium, and VIP) to cater to various client needs and budgets. Each tier should offer incremental value to justify the higher price points.
- Determine pricing strategy: Set competitive and sustainable prices for your recurring services. Consider factors like the cost of your time, the value provided to clients, and market rates for similar services.
3. Develop a Payment System
- Choose a billing platform: Select a reliable billing and subscription management system that can handle recurring payments, invoicing, and customer management.
- Set payment terms: Decide on billing frequency (monthly, quarterly, annually) and payment methods. Be clear about payment terms and conditions to avoid confusion.
4. Communicate with Clients
- Highlight the benefits: When introducing the recurring revenue model to existing and potential clients, emphasize the benefits such as consistent support, cost savings over time, and easier budgeting.
- Offer incentives: Consider offering incentives for clients to switch to a subscription model, such as discounted rates for the first few months or additional services at no extra cost.
5. Transition Your Clients
- Start with new clients: It may be easier to implement the recurring revenue model with new clients first, as they have not been accustomed to your previous billing model.
- Gradually transition existing clients: For existing clients, propose the new model as their current contracts come up for renewal. Offer them special terms as a sign of appreciation for their ongoing business.
6. Monitor and Adjust
- Solicit feedback: Regularly ask your clients for feedback on your subscription services to identify areas for improvement.
- Adjust offerings and pricing as needed: Be flexible and willing to adjust your packages and pricing based on market demand, client feedback, and your own capacity.
7. Legal and Financial Considerations
- Update contracts: Ensure your service agreements or contracts are updated to reflect the recurring revenue model.
- Consult your accountant: Consider the implications of the recurring revenue model on your taxes and overall financial planning. A financial advisor can provide valuable insights into managing predictable income streams.
Transitioning to a recurring revenue model requires careful planning, clear communication with clients, and a willingness to adapt based on feedback. By focusing on providing ongoing value, you can build a more stable and rewarding consulting practice.
