Elements to Increase Your Company Value Strategically: Part I

Recurring or Reoccurring Revenue

This blog is a continuation of the series on How to increase your business value with strategic concepts:

• Strategic –Recurring or Reoccurring Revenue – Part I

Reoccurring Revenue vs. One-Time Sales

Reoccurring or Recurring revenue occurs when a company can resell products or services repeatedly to the same customer.? If you sell an asset try to sell a consumable product or maintenance contract along with the asset.

Financial projections with a large reoccurring revenue base are more stable and increase the confidence and surety that the revenue will happen.

Who has a Hewlett-Packard (HP) printer?? How much did you pay for the all-in-one version? (About $150-$200)? This printer has many functions:? black and white or color copies, shrink or magnify, fax, photo printing, scan, computer Bluetooth interfaces, and more.? It is a great deal.

About fifteen years ago I paid $10,000 for a laser printer that just printed black and white copies.? Compared to this case and price today’s printers are a great deal.

However, how much is an ink cartridge? (About $30-$50)? The reoccurring revenue is large and the reason why printer companies do not charge a large amount for the printer itself is because they receive the reoccurring revenue.

Another example, is how much did you pay for your last cell phone upgrade? ($0 to a few dollars)? Why?? Because the phone company ties you into a two-year contract, the contract is like an annuity that provides high-value multiplies for value and a projectable revenue stream.

One CEO of a fitness center explained that she did not have any reoccurring revenue because her customers had to renew a contract every year.? Normally the turnover in this industry is 40%-60% per year.? Many people join in January as part of a New Year’s Goal, only to quit after a few months.

In contrast to the normal fitness center, her business had a customer renewal rate of 95%!!!!? Wow, this is a high-value business that would command a large value multiplier increase over her competitors because of her much better-than-market reoccurring revenue.

Therefore, work to obtain automatically renewing contracts, and consumable products. Create a proactive customer service program that raises customer retention, and renewal levels which increases the business revenue, profits, and value significantly.

A big shout-out to Stewart Lenner, NJ, President of Arrow Pest Control, for sharing his testimonial feedback with me and the community. Stewart was very involved in the CEO @Vistage group that Dale taught. Stewart learned business evaluations, techniques, strategies, and more from Dale. _________________________________________________________________________

Dale S. Richards specializes in management, marketing, operation optimization & business valuation consulting and is a 30+ year turnaround expert.?He has implemented success concepts into results in 150+ companies. Dale is a Certified Valuation Analyst (CVA) with NACVA, an Eight-Year Vistage Chair & International Speaker.?Visit www.successbiznow.com to learn more about Dale.

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