September 1, 2017
Increasing the value of a business through recurring income streams
By Achim Neumann
With optimism in the American economy high, many are looking to cash in on the businesses they built during the lean years of the Great Recession.
While streamlining business processes, conducting renovations, and keeping key talent on board are all great ways to increase a company’s value, few consider the power of building recurring income streams.
In this article, we’ll profile several ways ambitious entrepreneurs can beef up their revenues before courting potential buyers. Let’s get into it below:
Add a subscription service for products that need to be refreshed
Many people hate stocking up on everyday essentials. Wouldn’t it be great to have replacements delivered on demand?
There have been a number of success stories in this area of late, as Target has offered delivery of select sundries for several years now, and Dollar Shave Club built their business on delivering affordable and effective blades on a monthly basis.
Dollar Shave Club sold their operation in July 2016 to Unilever for five times their annual revenue (1 billion USD), which proved just how lucrative these subscription services can be.
Monetizing expertise by launching a membership site
Consultants who have built up a considerable body of knowledge over their career can leverage this asset by starting up a membership site.
By filling customers in on situation-specific insights, ambitious business owners can build up a dedicated body of subscribers within a short period of time.
Whether someone is an SEO wizard, a management guru, or a food and beverage expert, they can use this business model to productize their know-how.
This makes it easy for these owners to escape the time-for-money trap, as well as attract experts eager to buy a turnkey business.
Charge a monthly fee for services provided
Some business owners have no problem working with clients in real time. However, there are still ways they can increase the value of their business while making life easier on themselves.
By instituting a monthly fee for their services, they can make more while adding certainty to their cash flow.
This predictability also makes their business more attractive to buyers, making it easier to charge a premium.
Looking for opportunities to cross-sell
Here’s another question business owners should ask themselves: what do my customers buy after purchasing my product?
This can be done by researching similar products on Amazon, as they offer data on what customers purchase concurrently with a specific item.
If this technique isn’t practical, entrepreneurs should use their common sense: for example, those who design web pages should realize their clients may also need web hosting.
By offering them a deal which includes ongoing maintenance, a smart business owner can build a revenue stream that will increase their enterprise’s overall value.
Renting products in addition to selling them
While most entrepreneurs think in terms of selling x amount of product per month, not as many consider the recurring revenue that can come from renting out a portion of their stock to other customers.
Cars are an obvious example of this business model, but there are outdoor stores that rent out their camping gear, and there are hardware stores that do the same with their tools.
By thinking outside the box, business owners can monetize their idle inventory. This is an important adjustment to make, as consumers are owning less and renting more these days.
About A Neumann & Associates, LLC
A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or firstname.lastname@example.org