Get the latest Startup news and information

Please verify before subscribing.

3 ways to add recurring revenue to your business (and why you should)

Recurring payments are a great way to secure predictable and regular revenue for your business, giving you the confidence to invest in growth

How can you add additional value to your business starting tomorrow?

Two words: Recurring Revenue.

Recurring revenue is a company’s regular, predictable revenue stream, taken in the form of repeat payments from your customers.

Recurring revenue is good for consistent cashflow, consistent cashflow is good for predictability, and predictability is good for making confident decisions about growth. Meanwhile, you’ll have the peace of mind to focus on the more important aspects of your business.

Recurring revenue can also make your business more attractive to investors, who see businesses with a regular income stream as more stable and less risky.

What’s more, regular payment options are popular with customers, since they tend to be more affordable and allow them to budget more easily. They also provide added convenience: customers don’t have to make regular decisions or remember to act.

A word of warning: make sure you adopt a recurring revenue model for the right reasons; one that provides extra value for your customers and doesn’t just leave them paying for something they don’t want or need.

Here are the kinds of recurring revenue you could instigate today (and why you should)…

The subscription box model

Subscription box services have enjoyed a boom over the last few years, with everything from weekly meals to grooming products, coffee and booze available to be delivered to your door as frequently as you like.

If you’re a business selling consumable, perishable or non-reusable food or products, this could be the way to go for you. Many companies benefit from putting the control in the hands of their customers, giving them the flexibility to choose a payment tier and frequency that works for them.

Rather than having to go to the shops to buy your products, your customers will look forward to their arrival on a regular basis, and you’ll enjoy their ongoing and reliable patronage.

For example: HelloFresh is a subscription-based recipe box delivery service that sends meal kits to its customers. As it offers a flexible service – allowing customers to skip a box, redeem credit or change the type of box they get – the company uses a Continuous Payment Authority (CPA), taking payments directly from the card stored on the customer’s account.

Instalments for high value items

Whilst hugely expensive purchases like cars and sofas have long benefitted from paid instalments, there’s no reason why you can’t get in on the action with slightly more affordable but higher value items.

Even paying hundreds of pounds up front can put a lot of consumers off buying a product, so giving them the option to pay in regular monthly instalments could be just the push they need to commit to the purchase. Instead of large but sporadic payments, you’ll benefit from more, frequent smaller amounts.

This could be anything from vacuum cleaners to holidays. Home cleaning electrical goods company Vax gives customers the option of paying in instalments for its products and switched from taking card payments to direct debit to reduce the hassle of chasing customers for failed cards.

Change from annual to monthly billing

If you provide a service to a client such as an accountant or business consultancy, or offer subscription software and currently charge on an annual basis, why not just change to a monthly billing model?

It presents your customers with much more manageable regular payment and enables you to loosen up your cashflow. This has the added advantage of improved customer retention: even customers who are not using your service could continue paying due to inertia.

Again, you can make your recurring payment model appealing to customers by giving them the option to choose how and when they pay and offering a tiered subscription, with different price levels reflecting different levels of accessibility and value. Tiered models can encourage customers to start off small and pay more as they become more committed to your service and see how it can add value to their lives/ businesses.

The Wow Company, a small business accountancy and advice service, had been using a complicated system of collecting recurring payments for years, involving word templates, emailing invoices and altering the standing order every time a customer’s monthly amount changed.

The Wow Company decided to switch to direct debit, removing the need to employ a finance team and leaving it free to focus on more important tasks and building clients relationships.

GoCardless is a leading UK Direct Debit provider, currently processing payments for over 35,000 businesses across Europe. Sign up in minutes and take control of your payments, either using the online dashboard, one of the GoCardless partner integrations or by building a tailored integration with the powerful GoCardless direct debit API.

Henry Williams
Henry Williams

Henry has been writing for since 2015, covering everything from business finance and web builders to tax and red tape. He’s also contributed to many of our industry-renowned annual indexes, including Startups 100 and Young Guns, and created a number of the site’s popular how to guides. Before joining the team, he reviewed films for a culture website, and still harbours ambitions of being a screenwriter.