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Published On: Fri, Mar 15th, 2019

Income as a Service: 15 Monthly Recurring Revenue Models to Diversify Your Business

Monthly recurring revenue, usually shortened to “MRR,” is nothing new. Entrepreneurs tired of the tyranny of the sales cycle have been building recurring revenue models for hundreds of years, perhaps thousands.

Here’s the thing. Any subscription- or retainer-based business model is by definition a recurring revenue model, and one could make a case that business functions as basic as interest-based lending and insurance qualify as recurring revenue (usually monthly). After all, you send your check or EFT in the same amount on the same day every month to your home or auto loan servicer; you pay the same home or auto insurance premium on a monthly, semiannual, or annual basis.

What’s different about modern MRR is its sheer diversity. As the digital revolution has, well, revolutionized sales and marketing, it has opened up a vast array of completely new recurring revenue opportunities and has significantly lowered barriers to entry for others. At the turn of the 20th century, the wildly successful Sears catalog basically had the mail-order market to itself. These days, you can’t walk a block in parts of San Francisco and Seattle without passing some new subscription-based startup’s door.

photo/Gerd Altmann

Existing businesses are getting in on the MRR action, too — in some cases, radically rejiggering or completely revamping their business models and forecasting to make it work. If you’re looking for opportunities to diversify your existing company’s revenue model, or pursuing a spinoff opportunity that could help you weather whatever economic storms loom on the horizon, consider these tried-and-true ideas. Someone you know is probably working on one as you read this.

  1. Cloud Backup and Storage Solutions

The hockey-stick growth in corporate data usage boggles the mind. You can be sure that it keeps CTOs and CIOs up at night, too.

That growth — and worry — supports a booming market for cloud storage, archiving, and backup solutions. If you have ample in-house technical know-how, you don’t have to radically reorder your business lines or divert significant resources away from doing what you do best to offer a plug-and-play MSP backup solution that promises dependable revenue from small and midsize businesses that are just glad someone else is dealing with the headache.

Look for a backup solution with a pay-per-use licensing model that provides transparency and scalability on both sides of the transaction, plus flexible deployment options that align with your clients’ and team’s skills and preferences.

  1. Affiliate Subscriptions

“Affiliate subscription” and “subscription-based affiliate” are inexact terms. In this context, “affiliate subscription” means a subscription service that offers your customers access to premium offers from your affiliates.

What does this look like in practice? Here’s a simplified example:

  • You build a base of several dozen affiliates. This should be easy; thousands of e-commerce portals have plug-and-play affiliate programs with low barriers to entry and streamlined payouts. General retail sites, original product manufacturers, business or consumer services providers, even subscription-based services themselves (talk about meta) — all are prolific affiliate program managers.
  • Negotiate above-market affiliate compensation with as many partners as you can. You’ll need to promise high conversion volume or bring some other guarantees to the table; this is where your sales team comes in. Every above-market rate is a victory — you’ll tout particularly juicy offers in your marketing lit.
  • Establish a reasonable price point for across-the-board access to every affiliate deal in your stable. Is that $5 per month? $10 per month? $20? That all depends on the value locked away in said stable, which you’ll work tirelessly to grow over time. Make clear that you’re passing on all discounts above the standard affiliate discount to your customers; this is key to establishing value and differentiating your product from dime-a-dozen competitors.
  • Build a “freemium” package that offers non-paying customers access to run-of-the-mill affiliate deals — your standard 2% off at Walmart.com, for instance. Make it clear that the really good stuff is locked behind your subscription wall.
  • Offer pay-in-advance discounts: $50 per year instead of $6 per month ($72 per year), and so on.

Let’s be clear: affiliate marketing is a crowded space. To do well here, especially if you’re asking people to pay for what (they believe) others give away for free, you have to be good — really good.

You can handle that, right?

  1. Premium Content and Advice

The world is awash in content, most of it replaceable (and much of it inaccurate, unfortunately). Is there really a market for premium content subscriptions?

Absolutely. You have a Netflix sub, don’t you?

Good thing you don’t need a thousands-strong dev team and a billion-dollar movie studio behind you to deliver premium content that people are actually willing to pay for month in and month out.

All you need is in-house expertise and a healthy dash of passion.

Consider the types of content that you value: maybe career advice, expert-level financial guidance, perhaps news and analysis. Then think about what the market might be missing, and where these gaps align with your strengths (or the strengths of the team you’re ready to build to address the need).

If that means giving brand-name investing advice portals a run for their money, or setting up a deep-dive tort law newsletter, or anything else that you think you can provide, have at it.

  1. Knowledge and Certification Courses

Yes, technically educational coursework qualifies as “content,” but the model is distinct and specific enough to warrant its own treatment.

This is another crowded space. As with premium content and advice subscriptions, making your way here is all about finding gaps in what’s currently available.

Unless you’re willing to invest tremendous resources to go toe to toe with online education giants, consider targeting tightly defined, emerging niches that haven’t been well-served to date. Use the Bureau of Labor Statistics’ Occupational Outlook Handbook to peer around the corner and get a sense of which types of jobs will be in demand during the next business cycle. Target your offerings accordingly, giving preferences to tangible certifications that actually qualify “graduates” for the jobs they want to hold.

Or don’t. There’s a big market for “casual” continuing education among older, affluent adults pursuing second careers or worried about staying busy in retirement.

  1. Technical Support and Service Retainers

This MRR model shouldn’t require you to completely rethink how you do business. If it does, it’s probably not the right model for you.

Premium technical support is just one common example of a service retainer model that relies on recurring retainer payments from clients that know (or expect) they’ll need support, if not when, how much, or in what context.

If you’re already selling tangible products or software solutions, turning up an in-house service unit for high-tier service — rather than outsourcing to lower-quality external support provider that’s, frankly, unlikely to be equipped to handle complex client needs — is a great way to add perceived and actual value. In some industries and business lines, it may well be necessary to keep up with the competition.

Other types of retainer-based service models that promise substantial recurring revenue might include:

  • Legal services (though legal services providers may bill retainer clients by the hour as well)
  • Medical services (direct primary care)
  • Financial planning and advisory services
  • Other professional services, such as business accounting
  1. Extended Warranties

This is another MRR model that probably won’t demand a major reordering of your current business lines or focal center of gravity. If you sell certain types of tangible products already — just about any type of durable good or software, among other things — then your extended warranties will complement your core offerings nicely.

Making money off extended warranties isn’t quite as easy as making off with a printing press, but it’s pretty close. This is an actuarial calculation of sorts — all about setting your warranty pricing high enough to absorb inevitable losses from claims. Do that and you’re in business.

Well, as long as the products and solutions you’re selling aren’t garbage. But, were that the case, your warranties’ profitability is probably the least of your concerns — and you won’t be in business long enough to worry about what comes next, anyway.

  1. Subscription Meal Kits

Subscription-based meal kits need no introduction. If you’re among the dwindling numbers of meal kit holdouts, hang in there — resistance is more futile by the day.

If you’re among the hordes of harried professionals for whom meal kit delivery is quite literally the difference between healthy eating and — well, whatever the precise opposite of healthy eating is — then you know just how potent this classic MRR model is.

The trick is breaking into an increasingly crowded space. At minimum, your meal kit solution needs to be:

  • Chef-driven
  • Built around replicable recipes (no black-boxy, secret-saucy stuff here)
  • Locally sourced wherever possible
  • Accommodative of a wide enough range of diets (you know your audience, or you will)
  • Organic or sustainably sourced wherever possible

As supermarket chains turn up their own downmarket meal kit solutions, the subscription-based market is due for a downturn. That could leave room for upmarket niche providers — maybe like your soon-to-be meal kit provider. Or it could mean a turn to commodity kits. Whether that’s a turn you’re up for is up to you.

  1. Personal Stylist Plans

Not sure you have what it takes to break into the subscription meal kit space? Consider a stylish alternative: personal stylist plans that hook monthly or quarterly subscribers up with clothing and accessories that don’t look like they’ve been rescued from the clearance rack or overstock bin.

This is another crowded space, it’s true. And it requires a significant human resources investment — even if you’re using part-time or contract-based stylists, as many providers do.

The trick is establishing a niche and pushing your brand of fashion — however that looks — relentlessly. Personality is your friend.

  1. Premium Gaming Subscriptions

Look, you’re not going to compete with the Playstation Nows and GameFlys of the world. You can’t afford the licensing bill, and you don’t need the headache that comes with turning up a vast in-house IT and support architecture anyway.

Good thing you don’t have to compete with gaming subscription giants. Remember: the world is awash in content, and what are online games but interactive content? Surfacing up-and-coming game developers and lightweight-but-addictive amusements is all you need to do to carve out a piece of the multibillion-dollar recurring revenue market. Throw in some internal monetization (everyone’s doing it these days) and you’ve got yourself a robust, scalable MRR stream.

  1. Commodity Product Subscriptions

If you’re a pet owner, there’s a good chance you rely on Chewy, the pet supplies delivery giant (unless you love those weekly trips to Petco, in which case, more power to you).

Chewy is just one example of a commodity product provider — a platform that capitalizes on folks’ reluctance to actually, you know, shop in person. And its Autoship subscription service is an example of a commodity product subscription — a service designed for brand-loyal pet owners who don’t need to place the same exact order week in and week out.

What’s your commodity subscription angle?

Love What You Do, Love How You Earn

They say that those who do what they love never work a day in their lives.

Born entrepreneurs know better. By all means, pursue a career or build a business that allows you to live your passion every day. Just don’t have any illusions that you won’t have to scratch and claw to get what you want out of it.

Truly great leaders self-select, anyway. You’re not going to pursue a passion that asks you to devote the vast majority of your waking hours — evenings and weekends too, naturally — to managing and growing what you’ve built.

What you have every right to do — and what, in so doing, will set you apart from the vast majority of entrepreneurs who continue to work harder, not smarter — is set up a scalable revenue model that frees up your time and attention for strategic thinking. That’s the beauty of MRR.

Beyond that, the sky’s the limit. Choose one of the MRR models on this list, or pursue something different entirely; it’s up to you. Years from now, when you’re looking back with satisfaction at what you and your team overcame on the way to building something truly great, you’ll remember the day you first committed to revenue diversification.

Author: Ariana Smith

About the Author

- Outside contributors to the Dispatch are always welcome to offer their unique voices, contradictory opinions or presentation of information not included on the site.

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