Value Builder Factor 5 - Recurring Revenue

The Automatic Company: 5 Ways To Create a Subscription Business

Look at a recent credit card statement, and you’ll notice something relatively new. Instead of lumpy expenses for a few things you’ve purchased, you’ll likely see a number of small, monthly charges for services you subscribe to. You might see names like Netflix, Spotify, Google, Evernote or The New York Times. These are the pioneers in a radical shift from The Demand Economy to The Subscription Economy.

The Demand Economy

In The Demand Economy, businesses respond to customer demand. You open your store and hope customers will come to shop; you dutifully trudge to the office and hope clients will ask you to help with their next project; you go to the plant hoping you’ll be able to sell the stuff you make. Sure, you can stimulate demand through advertising, but you’re still in the position of hoping the money you’ve spent will get results.

The Subscription Economy 

In The Subscription Economy, the business model is turned upside down. You’re in control of your destiny. You proactively offer your service or product to customers on a monthly basis. The benefits of a subscription business are impressive:

• Positive cash flow. Subscribers pay up front. The more you sell, the more money you have in the bank.
• Higher profit margins. You can eliminate many costs associated with stimulating demand, such as an expensive retail store to capture foot traffic or advertising campaigns to stimulate “one-off” buyers.
• Peace of mind. Typically, you know within three percent how much revenue you’re going to have next month.
• Better planning. You’ll have a much better idea of how many employees you’ll need to serve your customers.
• In addition to the day-to-day benefits of recurring revenue, an annuity revenue stream also gives you more strategic options. Over at SellabilityScore.com we help owners understand what their company is worth, and recurring revenue is one of the eight most important things you can focus on to increase the value of your business.

Magazine companies pioneered the subscription business model that so many software companies leverage today. But you don’t need to be a cloud-based application to enjoy the benefits of a subscription business. Are you wondering if you could transform your company into a recurring revenue engine? Consider the following models.

If you sell other people’s stuff:

Retailers can offer a monthly goodie box. For $25 per month, Standard Cocoa customers receive a curated box of chocolates from around the world. More than 20,000 women pay $10 per month to receive a “Birchbox” every 30 days that is full of make-up samples. Moms are avoiding baby stores and instead signing up for Bluum.com, a monthly box of mom and baby products delivered to their doorsteps. Even old-school retail giant Walmart is getting in on the subscription action: for $7 per month Walmart’s skunkworks company, called “Goodies Co.,” will send you a new box of snacks and treats every 30 days.

If you make stuff:

Manufacturers can isolate a “consumable,” that is, the part of their offering that wears out or runs out. Take, for example, Nestle, the manufacturer of the Nespresso coffee maker. They could offer a subscription of refill coffee capsules each month.

If you advise people:

Consultants can package their best thinking up into a monthly report and charge on an annual subscription model. Forrester Research, Marketing Sherpa and Bloomberg have all done this.

If you keep an eye on things:

Home alarm companies and IT consultants have mastered the ability to charge on a subscription for monitoring what’s important to you. Alarm companies charge you $19.95 a month to “monitor” your house and call the police if someone breaks in. IT consultants charge you a monthly fee to keep an eye on your network and eliminate computer viruses if you get infected. Even some contractors are getting into the subscription business: Hassle Free Homes will keep an eye on your home and proactively fix things that need replacing, like your furnace filter, fire alarm batteries and light bulbs.

If you have a library:

GameFly (video games), Amazon Instant Video, Netflix, Rdio and Spotify all have a library of content they offer on an “all-you-can-eat” subscription. This model can work well for smaller businesses that have built a library of content. Newport Beach-based New Masters Academy offers access to their library of art classes for $19 per month. New Masters Academy has created more than 100 hours of content, so the hard work of creating the library has been done. Now each new subscriber comes with virtually no additional cost.

So, what’s your subscription business going to be?

Click  here to get your score now.

The Value builder score is an easy way to instantly see how well you are performing against the 8 Factors that drive value in your business. Business Doctors are certified Value Builders combining elements of the system created BY JOHN WARRILLOW with 10 years of hands on experience in helping businesses grow.

Images Courtesy of Getty  Images
Articles Courtesy of John Warrillow and Inc.com

Value Builder Factor 8 - Hub and Spoke

Who does the selling in your business? 

My guess is that when you're personally involved in doing the selling, your business is a whole lot more profitable than the months when you leave the selling to others.

If your goal is to maximize your company's profit at all costs, you may have come to the conclusion that you should spend most of your time out of the office selling and leave the dirty work of operating your businesses to your underlings. After all, you're likely the most passionate advocate for your business. You have the most industry knowledge and the widest network of industry connections.

However, if your goal is to build a valuable company--one you can sell down the road--you can't be your company's number one salesperson. In fact, the less you know your customers personally, the more valuable your business.

The Proof: A Study of 14,000 Businesses

We've just finished analyzed our pool of Sellability Score users for the quarter ending December 31. We offer The Sellability Score questionnaire as the first of twelve steps in The Value Builder System, a statistically proven methodology for increasing the value of a business.

We asked 14,000 business owners if they had received an offer to buy their business in the last 12 months, and if so, what multiple of their pre-tax profit the offer represented. We then compared the offer made to the following question:

Which of the following best describes your personal relationship with your company's customers?

1. I know each of my customers by first name and they expect that I personally get involved when they buy from my company.
2. I know most of my customers by first name and they usually want to deal with me rather than one of my employees.
3. I know some of my customers by first name and a few of them prefer to deal with me rather than one of my employees.
4. I don't know my customers personally and rarely get involved in serving an individual customer.

2.93 vs. 4.49 Times

The average offer received among all of the businesses we analyzed was 3.7 times pre-tax profit. However, when we isolated just those businesses where the owner does not know his/her customers personally and rarely gets involved in serving an individual customer, the offer multiple went up to 4.49.

Companies where the founder knows each of his/her customers by first name get discounted, earning offers of just 2.93 times pre-tax profit.

When Value Is the Enemy of Profit

Who you get to do the selling in your company is just one of many examples where the actions you take to build a valuable company are different than what you do to maximize your profit. If all you wanted was a fat bottom line, you likely wouldn't invest in upgrading your website or spend much time thinking about the squishy business of company culture.

How much money you make each year is important, but how you earn that profit will have a greater impact on the value of your company in the long run.

Click  here to get your score now.

The Value builder score is an easy way to instantly see how well you are performing against the 8 Factors that drive value in your business. Business Doctors are certified Value Builders combining elements of the system created BY JOHN WARRILLOW with 10 years of hands on experience in helping businesses grow.

Images Courtesy of Getty  Images
Articles Courtesy of John Warrillow and Inc.com

BY JOHN WARRILLOW

Founder, The Value Builder System

Are you running a valuable business?

Your company is probably your largest asset. It’s likely worth more than your house or your investment portfolio. But unlocking the value in your business can be tricky. For you to cash out, someone has to want to buy the company you’ve created.

That’s where The Value Builder Score comes in. The Value Builder Score is an assessment tool that allows you to see your company as a buyer would see it. Complete The Value Builder Score questionnaire and you will receive your overall score along with your performance on the eight key drivers of Value – each one of which is statistically proven to be important to buyers.

Whether you want to sell your business soon or just want the peace of mind to know you’re building a valuable asset for the future, improving your Value Builder Score gives you an immediate and quantifiable return on investment. A study of 6,955 businesses showed that companies achieving a Value Builder Score of 80+ (out of a possible 100) go on to sell at a 71% premium compared to average-scoring businesses.

Over the next 8 mails we will share valuable information enabling you to improve the value of your business. The eight factors that You'll learn:

1. The three attributes of a scalable business model;
2. The eight factors that drive the value of your business;
3. The valuation technique used by professional business buyers;
4. How to bulletproof your business from demanding employees, overbearing customers, and suppliers who hold you hostage;
5. One simple technique for eliminating cash flow worries;
6. The one kind of revenue that can triple the value of your business;
7. The two essential elements of your marketing plan you need in order to avoid commoditisation and costly price wars;
8. The one question you need to ask your customers to predict the likelihood that they will buy again in the future and refer you to others.

The Attitudebuilder

In our knowledge-saturated environment it is not more information we need, but clear guiding principles that help structure our thinking and actions. It is about knowing what you want out of life and going for it!

The Attitudebuilder™ is a half-day programme that galvanizes you to ACT on your goals, to look at what it takes to live the GOOD life, and to build your RESILIENCE, so that you not only cope with life’s challenges, but actually enjoy them! 

To decide if this programme is for you, you would need to say yes to two or three of these questions:

1. Do you need to be re-oriented as to what you want out of your life?
2. Are you struggling to achieve the goals you keep promising yourself you’ll do?
3. Are the lows, setbacks and disappointments of life getting you down?
4. Do you want to connect with like-minded people?
5. Are you looking for something new, fresh and invigorating to think and do?
6. Are you looking for a new business opportunity? (We are looking for business partners)

Book here

The brochure attached tells you about the programme and here are the details should you like to attend. Read more

What our customers say:

What three things have impacted your life as a result of the dip.Attitude programme?

"Think, think, think – about balance, about health, wealth and happiness, about other people, which has led to changes in action such as planning next holiday, taking vitamins, putting less pressure on children, taking an interest in colleagues, and other people at work outside immediate circle

Focus on the bigger picture of living rather than existing – which takes some effort"

"Setting goals and working towards achieving them in such areas as further study, and building better work relationships"

"Setting goals for 2015 such as going to gym and getting to next level in work"

Visit us at http://www.wisdoms123.com/

Book here 

Business Value

What are the factors that affect business value?

This study found that businesses with less product customization, ability to scale geographically and strong market position get higher scores. Sounds obvious? Not as obvious as you would think given the average score was below 59.

Seeing that the score is empirically proven to be linked to the size multiple of earning a business gets all businesses should at least know their score and have included improvement actions in their strategies.

Whats your score and how is it affecting your business value?  Download the research findings and an explanation of how the survey works here.

Escaping the owners trap

The Owner’s Trap

The challenge: Most business owners are not free at all. They are trapped by their business because…

• The owner has the most industry knowledge;

• Customers want to talk to the owner;

• The owner wants to please customers, so says “yes” to too many customer requests;

• The owner’s employees do not have the same level of industry experience as the owner, so cannot deliver what the owner promises customers;

• The owner gets involved in delivering what the customer has asked for;

• The customer is happy and buys more from the owner to repeat the cycle.

Signs You’re in The Owner’s Trap

This phenomenon is called “The Owner’s Trap.” The signs that you’ve fallen into this common trap are:

• Business slows when you take a vacation;

• Customers come to you with problems;

• Your growth has reached a plateau.

Businesses stuck in the owner’s trap are stressful to run, but that’s not the only problem. They’re also worthless because nobody is going to buy a company that is dependent on its owner

Free yourself from The Owner’s Trap by building a sellable business

Freeing yourself from The Owner’s Trap means building a sellable company; not necessarily because you want to sell, but because creating a sellable company gives you choice and freedom:

• A sellable company can be scaled up beyond you…

• You can choose to promote yourself to the chairman’s seat and let your employees run the company day to day…

• You can pass it on to your kids or young managers with confidence…

• You can sell it, giving you the ultimate in financial freedom.  

Think of a sellable company as the ultimate poker hand that gives you the very best choices.

So If Sellability = Freedom Wouldn't you like to know just how sellable your business is?

The Sellability Score is a free online assessment that measures the Sellability of your company. Once you have answered the questionnaire, you will immediately get your Sellability Score out of 100 in real time – while you’re on our website. It’s free and the results are confidential.    Get your score here

Download PDF here

THE ESSENTIAL WEBSITE CHECKLIST

Your website is the foundation of your digital marketing strategy.  It’s the first thing you need to set up when you embark on marketing your business on the internet.

 Our checklist will help you ensure that your website is not just about pretty pictures but also about functionality that you need to put in place in order to use your website to grow your business.

Blog Post Content by: Cantaloupe Digital

1. Newsletter signup along with a plan to send regular newsletters
2. A blog to which you contribute meaningful and relevant articles to at regular intervals
3. Social Media share functionality make it as easy as possible for people to share your content
4. Your contact details. It should be as convenient as possible to contact your company
5. Decent content which you keep updated as your company grows / changes
6. Links to your Social Media pages, yes unless you’re an undertaker or someone else with a brand that is not really social (though you are welcome to prove me wrong!), you most probably do need a  social media page.  This is also a good strategy to dominate the first page of Google search results for your brand
7. If you can measure it you can manage it! Put Google Analytics tracking on your website and check these reports regularly. Even better use the Goal Conversion tracking in Analytics.  Together this will give you a good indication of your marketing efforts working to drive traffic to your website and if prospective clients convert to an enquiry once they are on your website.  Also make use of the Google Webmaster tools and be sure to submit a sitemap in here.
8. Do Basic SEO on your website (Title, Description, and Keywords, use the Header tag functionality.  This is similar to the functionality you get in Microsoft Word to format a document)
9. Ensure it works on mobile devices – browsing from mobile devices is growing on a daily basis.  Give your site visitors the best experience possible from desktop and mobile devices.  One strategy is to have separate websites for desktop and for mobile (mobi site) but this means you have to maintain two websites (and do SEO for both).  Consider a responsive website for your website. This is a website that works optimally on both desktop and mobile devices.
10. It needs to be fast - people are impatient and they wont wait around for your website to open.  If they wait more than 3 seconds they’ll leave.
11. Do regular backups – check that your website hosting company backs up your website on a regular (daily) basis and have a backup plan of your own in case their’s fails.
12. Put internal links on the pages on your website to better assist Google index all the pages on your website and assist site visitors to navigate your site

Want to learn more? attend our Free Digital Marketing Seminar

Register now for our Free Digital Marketing Webinar

Blog Post Content by: Cantaloupe Digital