What is recurring revenue? all you need to know …

1) THE NETWORK MODEL

When it comes to the value of your business, what happened in the past is much less important than what is likely to happen in the future.

One of the most important ways you can shape the future of your business is to create some recurring revenue. Recurring revenue comes from those magical sales you make without really trying. Good examples of recurring revenue models include ongoing service contracts, subscriptions, and memberships – basically any sale situation the customer has to proactively opt out of, instead of in to.

Recurring revenue is critical for the value of just about any small business, and it is equally import for the world’s largest businesses.

John Warrillow, in his book The Automatic Customer:  Subscription Business in Any Industry. Selected by Fortune Magazine as one of the “5 Best Business Books” of 2015 discuss various recurring revenue models. Today we will talk about the Network Model.It is a subscription offering where the value of the subscription goes up, the more people that subscribe.

The Model

One of the oldest Network Model subscription offerings was the telephone. When only a few people had a telephone, its utility was limited because there was nobody to call. As more people subscribed to a telephone service, it became more valuable for all subscribers.

What makes The Network Model unique is that the users themselves have a vested interest in promoting the subscription: the more people who subscribe, the better it is for everyone.

The more people that subscribe, the better the product is to subscribers.

network

For example, with the WhatsApp messaging platform, subscribers, for one dollar a year, can send an unlimited number of messages to one another for free, because instead of routing the messages through a mobile carrier, WhatsApp messages are sent through the Internet.

Subscribing to the multi-user video game World of Warcraft is fun but even more fun when you get all of your friends to join you in cyberspace.

Who The Network Model Works Best For?

Consider The Network Model if:

  • You have a product or service where the utility improves as more people join.
  • You can attract tech savvy customers and prospects. The more socially connected your customers, the faster your network will grow.
  • You can offer a remarkable experience that people feel compelled to share. (If your product is only somewhat better than the alternative, this is not the best model.)

What the Insiders Say:

  • You need subscribers to build the network, but you need a network to attract subscribers. Focus your limited resources on a small, tightly defined group of early-adopting customers and then build density in that specific market.
  • The Network Model is best suited for companies that have a lot of capital, or entrepreneurs that are good at raising it.

Next week we will explore The Surprise Box Model

Can your business survive without you?

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If you wish to build up the value of your business and would want to explore what you could do to make it sellable, please do not hesitate to call Jean-Bertrand de Lartigue on +44 1656 766 363 or email him, jb@exit-planning.co.uk

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We Wish You a Wonderful Christmas and a Prosperous New Year.

Thank you all for your support in 2015! We will resume writing articles the 2nd week of January. Best wishes Jean-Bertrand de Lartigue

We Wish You a Wonderful Christmas and a Prosperous New Year.

Thank you all for your support in 2014!  We will resume writing articles  the 2nd week of January. Best wishes Jean-Bertrand de Lartigue