Recurring Revenue Models: 3 Upsides That Change Everything

Added: 2026-05-21

[00:00:00]Most business owners, when they think of a recurring revenue model, they think about one thing, smoother cash flow, less anxiety on the first of the month, and they're right, that's real. But that's just one of the three reasons why every business owner should have a recurring revenue model implemented into their business. There are actually three big upsides to putting an RRM into your business, and most people only talk about one of them. The other two are also very very important. And when you understand all three, you'll be even more excited about implementing a recurring revenue model into your business. Let me walk you through all three. And these three are in addition to having that guaranteed cash flow coming in at the first of every month, so you're not starting off at zero.

[00:00:50]Reason number one, it amplifies your regular business. Reason number two, the relationship becomes the asset. And number three, it makes your business worth more than a comparable business that doesn't have a recurring revenue model system set up within it. Let's talk about upside number one, having these returning recurring revenue customers actually amplifies your regular business. It's v- it's very easy in a in a transactional client, they're going to compare prices every time. They're going to shop around every time they need uh your product or service.

[00:01:26]But once they become an RRM monthly paying customer, you are their option. They stop shopping around, they spend more money, they refer people to you because you're their guy or their gal. Which leads me into upside number two, which is also related. The relationship becomes the asset. Your marketing dollars are going to go further. You are able to allocate your marketing dollars toward growth, not replacement. I want to hammer this one home. When you're in a traditional, transactional type of business, all your marketing advertising dollars are going to get more business to replace the transactions that you finished last month or last quarter or last year. When you have an RRM, you have on the books these returning recurring returning customers, so your marketing dollars are adding to that, not replacing. That is a huge, huge difference.

[00:02:25]Your acquisition costs drop, retention starts to do the work that your marketing dollars to acquire new customers used to do.

[00:02:34]And while I'm at it, let me sneak in one little important thing for those of you who have RRMs or want to build an RRM into your business, retention is not passive. It's not defensive. You you've got to be on the offense on this, and it really comes down to what you do the first 90 days. Just make sure that your new customers, your new RRM clients have a great experience in the first 90 days.

[00:03:03]Once you can get them to see the value and feel the value the first 90 days, their chances of canceling go down significantly, and you have bought yourself cash flow because you have a new asset, which is a satisfied long time long-term customer.

[00:03:26]And that will increase the lifetime value of that customer or the amount of money you will make per customer once you lock them in because of that first 90-day experience. Now, let me go on to number three, which is very interesting because a lot of people when they start a business um I'm myself an entrepreneur. I have started, owned, operated uh many multi-million dollar businesses, and here is the reality.

[00:03:54]When you're starting a business, you're thinking about growing the business, making money off of the business. A lot of operators, a lot of business owners, don't think about their exit strategy.

[00:04:06]But here's where this is awesome on the back end. It actually makes your business worth more. If you have a group of investors coming in, if you're trying to sell your business, it makes it worth more because what private equity groups are looking at, what potential acquirers are looking at, is how predictable is the income. What did the cash flow look like, and what will the cash flow look like going forward?

[00:04:33]And guess what? When you have people on a subscription service, on a membership, or some other form of recurring revenue, your income, your cash flow becomes predictable, and that makes your business worth more.

[00:04:47]You will get more money when you sell your business, when someone looks to acquire your business, because instead of having just transaction-based revenue coming in, where it may be dependent on you as the owner, and the the buyer just can't step in and have guaranteed income. With a recurring revenue model, you have predictable income that's committed, that is on auto pay. And when the new buyer of your business steps in, that money continues coming in.

[00:05:18]And that makes your business worth more than someone else in your space because the potential acquirer sees guaranteed income.

[00:05:30]I worked in mergers and acquisitions as an investment banker. It's all about multiples. How much of a multiple can you get? What kind of a 5x, 10x, 20x, well, maybe not 20x. It's a little exaggerative. But what kind of multiple can you get on your business as it relates to what you bring in every year?

[00:05:54]And if you want to go from 3x to 5x to 7x, having a recurring revenue model makes your business more valuable, meaning more money in your pocket when you want to exit, when you want to retire, when you want to sell that business. Let me put an example based on one of my coaching clients. Let's say we have two natural supplement suppliers. They have the same revenue coming in every year.

[00:06:24]They have the same type of clients, and they provide the same products. One of them bills every order separately.

[00:06:32]The other has membership auto reorders.

[00:06:36]The first supplement company, every single month they start off at zero. They have to use marketing and ad dollars to replace and get new clients every single month. A buyer can't step in and just assume that they're going to continue having that cash flow come in.

[00:06:57]In contrast, a another supplement supplier has committed predictable income coming every single month because they have people on a membership, and they're auto shipping. They're getting these automatic reorders. So, a buyer comes in, and they know that because they have X amount of memberships that they're going to have X amount of monthly reorders and consistent cash flow. That makes the enterprise, that makes the business worth more. So, it's not just about having consistent income, consistent cash flow, which of course is key because cash flow is king. But, when you factor in these other three upsides, it makes all of the effort to implement a recurring revenue model into your business an absolute no-brainer. It amplifies your regular business.

[00:07:52]Committed clients are going to be spending more and referring more.

[00:07:56]Your relationship becomes the asset. You get people in and they will be spending money month after month for years to come. And then the business itself, when you want to exit or bring on investors or grow it, it makes your business worth more because you have that recurring revenue coming in and cash flow is king. And that is something key that a buyer investor wants to look at. What is the income and how solid is that income going to be once I invest in or buy that business?

[00:08:28]Having an RRM helps you get more money for your business. So, those are the three upsides. Folks, if you want to see how you can implement an RRM in your business, go to whatismy rrm.com and a member of our team will get back to you about how we can help you with that. I also have my book that just came out this week. It's called Paid on the First and I talk all about this. You can go over to paidonthefirst.com and get the book for free, just cover shipping and handling, and find out how you can implement an RRM in your business. I got more videos, so make sure that you hit that like and subscribe button cuz I will be back.