There are 3 reasons to build recurring revenue to fix your business:
- It can generate immediate cash.
- It will generate consistent cash over time.
- It will increase the value of your business if you’re looking to sell.
Since your business is struggling, building recurring revenue by offering payment plans for your equipment and services is not what we’re focusing on right now. At the moment, we need to generate cash today with little up-front investment, which I covered in detail in my blog on this topic. For that reason I won’t spend any more time on it again. Since August 2009, my business has created an additional $314/month in recurring revenue. That doesn’t sound like a lot (and it certainly isn’t considering our potential), however we’re just starting this program, everyone is still learning how to sell it, and our up-front costs, for a predictable $3768/year, are very close to nothing. Our goal is to have $500/month by 2010 and $3000/month by 2011.
In reality, the idea behind building recurring revenue and improving your sales and marketing is the same. Your goal at these last 2 steps is to develop a way to create consistent cashflow. Whether that means you need to sell something new to your customer again and again, or you need to bring in new customers regularly, a great sales and marketing system will generate predictable income for your business. I would venture to suggest that if you had a sales system in place during boom times, you wouldn’t have nearly the problems you do now in a slow economy.
So let’s summarize once again what it takes to fix any business in trouble (and though I write passionately for small businesses, nearly everything can be applied to Fortune 500 companies):
- Change yourself – By making a commitment to do so, particularly by working ON your business instead of IN it, and making by making lists.
- Know your numbers – If you don’t know where you are, you have know idea where your problems lie and can’t develop a plan of attack to fix them.
- Cut Costs – As drastically as necessary based on your current circumstances.
- Improve Efficiency and Productivity – Since your business is not doing well, your profit per person is obviously lower than it needs to be for you to succeed.
- Improve Marketing and Sales – Though this is number 5, you need to work on it along with the rest to make sure you always have money coming in.
- Build Recurring Revenue – Make this a priority. It can help you through the next tough time.
Several times I’ve mentioned the importance of lists, systems, and procedures. These items are not just for your team members, they’re for you (and me). You need your checklist to fix the weak links in your business systematically without losing focus. You also need a daily schedule to block off your time for each of the 6 items above. You literally need to block off time for each one without any phone calls, emails, door knocks or other interruptions.
My final bit of advice is 3-part:
- Steal the best ideas you can. This can be from your competitors, other similar business, businesses you see on TV, from reading books, asking people who are doing well, taking classes, or almost any other business related source. Granted, there are a lot of people who don’t provide much “meat and potatoes” advice, however when you find a source that does, learn as much as you can. As I like to say, “It’s always better to learn from others’ successes than your own mistakes.”
- Apply the pareto principle. 20% of what I’ve covered in the last 5 blogs will give you 80% of the results. The trick is determining which 20%, right? Well if you know your numbers this isn’t that tricky. Your numbers will tell you where you have the greatest potential for improvement. This is how you will prioritize everything.
- Know when to cut your losses and move on. If you’ve legitimately done almost everything we’ve reviewed over the last 5 blogs and you’re seeing little to no improvement, you need to move on. Don’t be the guy who holds onto GM’s stock thinking “they’ll never go bankrupt.” Salvage what you can and sell either the whole business or the assets and move to the next project. No amount of money can ever buy you more time, so if your time isn’t being invested in a business that’s moving forward and making your life better, you need to get out of that business.
In less than 5,000 words we’ve reviewed literally dozens of directly applicable things you can work on today to improve your business. Take action and make the improvements.
To your success, Bryan
P.S. If you’re looking for a business to buy, find one that does very few of the things reviewed in the last 5 blogs yet is still making money.