How to Get Recurring Revenue in Website Design


All right welcome back. Productize. Now let’s talk about recurring revenue. I know I’ve mentioned this in a previous lesson but it’s worth restating charge monthly recurring revenue is going to be your saving grace as you build a web design company without it scaling is going to be incredibly hard. So in this lesson explain just how big an impact recurring revenue can have on your business. And then we’ll talk about how you can charge a recurring fee. So first let’s compare two businesses with different pricing models one that doesn’t have recurring revenue and one that has Richar recurring revenue both businesses charge twenty five hundred dollars upfront to design a web site. However business one simply sets up the Web site and then sends the client on their way without getting monthly revenue. So in order to make ten thousand dollars in a given month business one has to sell for Web sites and that month business too. On the other hand it charges a monthly management fee of $100 a month and NSCLC of a thousand dollars a month and lets say they have three clients at a thousand a month for our total recurring revenue of 3000 per month and 20 at one hundred per month for our total recurring revenue of 2000 per month. If we add those two together three thousand plus 2000 we have $5000 per month in recurring revenue. So even without signing any new clients business too is already half way to making $10000 in the month. Then if business to sign is just two new clients they make that 10K. So which business do you think is more valuable. Or let me ask it another way if you could own either of these businesses. Which one would you want to own business to write it as to sell to less clients per month to earn the same amount of revenue and it has an existing ongoing client base that it can upset and cross-sell to. All right. So you might be thinking Well sure getting $99 a month would be great but my target market wont pay that they will though. And if not ninety nine a month at least 50 a month for basic service business that is making money which is what you’re looking for we’ll be willing to pay a monthly fee when you show them what they’re getting for that monthly fee. So what are they getting first hosting security backups and maintenance. The translation here is basic peace of mind that their Web site will be up won’t be hacked. And in the unlikely situation that it is hacked it’s backed up so that it can be restored. Next customer support and Web site changes to the client. This means that when they need to make updates there will be a person to contact to get that done. They don’t have to go find a freelancer firm who knows how to manage the Web site every time they need to make changes. They just send an e-mail to you don’t downplay the importance of this it’s very important to clients next reporting and analytics if your client is at all interested in seeing how the Web site is performing and generating revenue for their business they will surely pay for reporting in analytics. Then we have ongoing platform improvements. If you’re using Office sprout and again we’ll talk more about off sprout later. Your clients will be getting a platform that is continuously improving and updating with the times and latest code standards. And finally marketing services for clients who really want to make the Internet part of their marketing strategy services like PPC and SEO are a great way to charge an ongoing monthly fee. So now it’s time to see just how pricing and recurring revenue can affect your business. Make sure you have the document cache that you can download at productize dot com slash DL and open up the pricing and revenue goals worksheet. So let’s look at some realistic projections so we can see why recurring revenue is so important. So this is assuming an upfront price of about $2000 recurring price of $100 for a standard package and recurring marketing package of $600. Then we have three new website customers per month and one marketing customer per month. So one customer per month at that 599 and three at the 99. So using these numbers up front revenue in year 1 is about 71000 and recurring revenues about 23. But you can see as we go to year 2 3 for the amount of recurring revenue quickly overtakes the upfront revenue and becomes the main part of your business. And this is great because recurring revenue is reliable which lets you plan ahead and scale your business and feel free to play around with these numbers. For example if you think you can sign 5 new website customers per month and maybe 2 new marketing customers per month you can see that that quickly increases the amount of yearly revenue that youll get and increases the growth of your company. So hopefully now you see how important recurring revenue has been in the next lesson. We’ll talk about how to name your company.

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