Recurring revenue is the foundation of a successful freelance business. In this post, we’ll talk about why it’s so important and why you need to embrace the concept.
What Is Recurring Revenue?Recurring revenue is any kind of consistent income you earn automatically. You don’t have to go drum up sales, it’s already sold. And it keeps coming—maybe monthly, quarterly or annually.
Recurring Revenue is a smarter way of doing business because it offers more stability and less time wasted on sales. Recurring revenue can help you avoid (or at least minimize) the feast or famine freelance cycle that plagues many freelancers.
Freelancing Without Recurring Revenue
Consider the challenges of freelancing without recurring revenue:
- No guarantee of making sales: Just because you made six figures last year doesn’t mean you will this year.
- No safety net: And if those sales don’t come in, you’re sunk.
- Desperate for sales: Because you’re so dependent on sales, you’ll take on clients you probably shouldn’t.
- Client’s mercy: You’re at the client’s mercy to supply content or approve changes so you can finish a job and get paid.
Now maybe you’ve been able to find consistent projects. That’s great. You’ve managed to keep busy. But things can change. Do you really want to bank on being lucky? Do you really want to live with that kind of uncertainty?
Freelancing With Recurring Revenue
Recurring revenue sets you free from all that. It can be a safety net when regular work is slow. It offers stability for your business, which means stability in your life.
Consider the benefits of freelancing with recurring revenue:
- More consistent income: You create stability in your freelance finances.
- More predictable work: You can spend time working instead of selling.
- More profitable relationships: Clients will see you as a partner and refer more work.
Now sure, nothing is ever certain. Even with recurring revenue, you could have clients flake out or the economy crashes and you start losing clients. But even in a nightmare scenario, recurring revenue gives you a major leg up. Clients will freeze new projects first, but they’re more likely to stick with a maintenance plan because it’s a basic need.
Establishing the Proper MindsetAs a freelancer, you need to develop an entrepreneurial mindset that pushes beyond simple service transactions.
You build a website, you get paid. That’s a great business, but it has some serious limitations: You’re working project to project, you’re limited by the hours you can commit, and you have to keep drumming up new sales.
But you build a website and sell a maintenance plan, you get paid for the site and you get paid for the maintenance every month.
As you build that recurring revenue, it can really add up. It will start to smooth out your finances and provide a baseline that means you can chase fewer projects if you want.
Do you want to work harder or do you want to work smarter? It’s all in how you think about it and approach your work.
When is a dollar worth more than a dollar? When it’s predictable. The more predictable a dollar is, the more valuable it becomes. One dollar every month adds up to a lot more than $5 right now.
Consider the income models of Netflix vs. Blockbuster. With the old retail rental concept, Blockbuster relied on repeat sales. People had to come in the door every day and rent a video for them to make any money. But Netflix relies on a subscription model. They make money whether you watch Netflix or not.
The Recurring Revenue DifferenceOne way to think about the value of recurring revenue is to think about the difference it would make in your business.
What if 30% of your income was recurring revenue? What if you could pay your salary with recurring revenue? How would that change things?
The pressure of sales would go away. You wouldn’t take on problem clients, but would only go after the projects you really wanted to do. You could take more vacations. You wouldn’t be as stressed about money.
It could change how you approach work.
Not Simple, But Possible
Of course building recurring revenue is not easy. It won’t happen overnight. It will take time to figure out what services you can offer, start offering them, and build that business. But over time, you can do it.
With the right understanding and the proper mindset, you can build a recurring revenue business. More than specific strategies or what recurring services you can offer, you first need to embrace the mindset of recurring revenue.