Why do digital marketing agencies need recurring revenue?

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Why digital marketing agency need recurring revenue?

 

Running a digital marketing agency is an amazing thing to do. You have the privilege of doing creative, meaningful job while interacting with great brands, making real impact on people`s daily lives while implementing your out- of- the – box thinking into reality.

Amazing, right?

But sometimes, when the end of the month comes and when you need to pay salaries and tax , fun part is gone. And if you didn’t have enough projects that month, it can be a really though period for digital marketing agency.

 

Hunters vs farmers

Most product – based companies that sell complex products (like automotive industry) or service companies that sell broadband services that are based on a monthly fee by nature (like accounting services) today make money “while sleeping” because their products or services are sold , or market need is created even after working hours.

But in most professional service companies that are dealing with specific types of services – like digital marketing agencies or web development companies – money making machine is working only when employees are productive.

And this leads to one of the biggest issues that digital marketing agency can have: how to make stable cash flow that can allow long term planning and business stability.

 

Why digital marketing agency need recurring revenue?

Beside that Gartner forecasts that by 2015, 35% of Global 2000 companies with non-media digital products will generate up to 10% of their revenue from recurring models, there are many more reasons why digital marketing agency need recurring revenue and we will mention a few here:

 

  1. Stability

Developing recurring income gives your business a financial stability that not only gives you peaceful sleep but it allows you to start planning ahead and thinking about the growth of your company. Also, it not just gives you more income, but it helps you develop and maintain long term profitability which is one of the most important (if not the most important) things for your company growth.

 

  1. Focus

Steady monthly income gives you opportunity not to think about operative issues of paying your employees, suppliers or government and allows you to focus on most important thing for your business – creativity. Rather than trying to sell each month new project, recurring revenue stream gives you time to think how to be more creative, more innovative for your clients which finally leads you to be unique on the market and have higher margins for your services.

  1. Loyalty

If we summarize previous two criteria, logical conclusion is that things you can do for your clients by running an extra mile (while running a business with stable cash flow and secure monthly revenue), will provide you higher customer satisfaction and in return, customer and brand loyalty. If you manage to make repeatable business with your clients, you will be in position to better understand their needs so you can ensure that your product or services give them the best value for their money which they will appreciate by giving you their loyalty and recommendations.

 

4. Overhead

One of the worst things that can happen to your digital business is that during unpredictable business conditions you can have fast overload and even faster overhead in short period of time. It is often with companies that doesn’t have recurring revenue strategy to have challenges handling appropriate headcount per project for a longer period of time an even more often is that they need to lay off people after big project is done as consequence of not having stable business for the future and cash flow.  On the top of this consequences this strategy (ad hock revunue) can make your company culture very fragile and make people nervous about their job stability which will finally led to low employees efficiency.

 

How to make recurring revenue strategy?

Creating a strategy for recurring revenue stream can be done easily in maximum few hours, and first step to do that is by downloading our free book that contains a few ideas and steps that potentially you can implement in your digital marketing agency, but before you download it, we will name a few ideas here:

  • Subscription model – this recurring model is one of the most used ones in digital business. Foundation of this model is based on customers payment on fixed amount for access to products or services, for a specific period of time.
  • Pay per use – This model is based on charges per use of products or services that are usually recorded automatically on a preexisting account.
  • Subscription plus pay per use – This model is combination of previous two models, based on fixed monthly payment for some basic functionalities or services and then upselling model (pay per use) for more specific features or specialist services.

 

Conclusion

At the end of the day, the odds are stacked against business that are developed on ad hock revenue streams because there’s a good chance that it will fail on a long term due to lack of money so if there’s any way that you can incorporate a recurring revenue model into your business, I would certainly recommend that you at least consider it

 

Would you like to found out how to implement recurring revenue strategy? If yes, just click on the arrow below and you will get our FREE ebook about recurring revenue strategy for your company.

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