How to Grow Your Business with Recurring Fees
By Brenda Barron
Published June 30, 2022
Running your own business is incredibly rewarding but it can also be unpredictable in terms of income. One month, you might be making sales left, right, and center. The next month, you might be wondering if you’ll make enough to cover all your expenses.
You might be thinking that simply increasing the number of clients or sales is the magic solution. But in the long run, that’s not always feasible nor sustainable.
So what is the solution then? The answer is — recurring fees. In this article, we’ll cover what recurring fees are, why they’re good for revenue, and which types of businesses can benefit the most from charging recurring fees. We’ll also discuss top tools to get you started with accepting online payments. Let’s dig in…
What Are Recurring Fees?
Charging recurring fees, instead of a one-time payment, is a business model where you accept an ongoing monthly fee for your product or a service. Instead of selling the product or your service once and continually marketing your business to drum up sales, you sell that product or service to your existing customers over and over again.
Why Recurring Fees Are Good For Revenue
So now that you know what recurring fees are, let’s look at several reasons why recurring fees are good for revenue…
Reliable and Predictable Income Stream
Recurring fees are one of the best ways to create a predictable and reliable income stream for your business. With a recurring fee business model, you don’t have to worry about how much money you’ll make each month.
Instead, all you have to do is multiply the price of your recurring fee with the number of products sold or existing customers. You’ll instantly know how much money you’ll bring home; not to mention your income and profit will be more stable year after year.
Selling to New Customers is Hard!
The probability of selling to a new customer is between 5-20%. Compare that to the 60-70% probability of selling to an existing customer and suddenly, recurring revenue starts to make a lot more sense.
Think about it: with a one-off sales model, you have to build trust with a new potential customer. This doesn’t happen overnight so it might take a while before you actually see the sale. Once you sell them the product or the service, you part ways. Then, the sales cycle begins anew.
By creating a subscription based model, your existing customers will continue to buy your products or services month after month. All you have to do is to ensure your company provides value for money so that customers are happy to keep paying a recurring sum.
Cuts Down on Your Marketing Costs
With a one-off business model, you have to continually market your offers. After all, without marketing them and keeping them top of mind with potential customers, you won’t make many sales. This is especially true if you’re not a big brand with a well-established reputation.
Marketing your business has its costs, and even if you’re doing it yourself on a budget, it still costs you time. That time could be better spent on serving your existing customers or developing new products and services.
Moreover, research shows that it costs 5 times more to acquire a new customer than to keep an existing customer. Plus, did you know that even a 5% increase in customer retention can increase your profits between 25 and 95 percent?
When you keep the above in mind, it’s easy to understand why recurring revenue can lead to serious business growth.
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Which Types of Businesses Best Benefit From Charging Recurring Fees
There are several business models that can benefit from charging recurring fees. Here are a few examples…
Marketing and Design Agencies
If you offer marketing or design services, you can easily charge a monthly fee for ongoing work. Many businesses nowadays need ongoing marketing help; whether that’s creating content for their blog or helping them manage their social media profiles.
Similarly, you can offer an ongoing website maintenance package or a design package to cover design needs for social media, newsletter, blog, or ads. For example, WPBuffs offers ongoing WordPress maintenance for both website owners and white-label services for other designers and developers.
eCommerce Stores
If you’ve been shopping on Amazon, you’ve probably noticed they have an option to subscribe to certain products. The way it works is like this: you buy a certain quantity of the product you need and Amazon will then deliver the same quantity to you on a regular basis.
The main selling point is that customers can save money with a subscription instead of coming back and placing another order. Another benefit for customers is that they don’t have to worry about running out of their favorite products because they forgot to order them.
Many online stores offer subscription boxes. These include Dollar Shave Club, LootCrate, BeanBox, and plenty of others.
In-Person Services
If you’re a service provider, you can charge a recurring fee. For example, if you’re a personal trainer, you can create a monthly recurring package for clients that want accountability and help with getting in shape.
Similarly, if you’re a cleaner, dog walker, private tutor, or run a kids club or adult education class, you can incorporate monthly retainer packages into your business and create a stable income for yourself.
Membership Sites
A membership site is another effective and lucrative business model. The good news is that you don’t have to start a completely new business to make it happen. You can package your existing content and make it work for you by turning it into a membership site.
For example, Food Blogger Pro is a great example of a successful membership site all about teaching you how to start and run a food blog.
Nonprofit Organizations
If you’re a nonprofit organization, you can set up recurring donations and create a reliable stream of donations for your cause. Hope for the Warriors and Charity: Water are just a couple of non-profit organizations that have the option for recurring monthly donations.
Software Subscriptions
Lastly, if you sell software of any kind, you can easily charge a recurring fee for it. Just think of software you use on a daily basis – Spotify, Netflix, Microsoft Office, Adobe Creative Cloud, and many others are successfully using the subscription model.
Use Gravity Forms to Charge Recurring Fees
By now, you’re probably wondering how to set up a recurring fee for your own business. The good news is that you don’t have to install complicated plugins or hire a developer to create the solution for you.
With Gravity Forms, a powerful form builder for WordPress, you can easily set up recurring payments for your business.
A few notable features that Gravity Forms offers include:
- Intuitive drag and drop form builder
- Built-in features including multi-page forms, conditional logic, file uploads, spam protection, and more
- Integrations with third-party platforms such as email marketing and CRM platforms, payment processors, and Zapier
- Extensive documentation and tutorials to help you get the most out of your forms
On top of that, Gravity Forms integrates with PayPal, Stripe, and Square, which all enable you to easily charge recurring fees.
You can:
- Create subscription plans and set how often your customers are billed
- Process refunds directly from your website without ever leaving your WordPress dashboard
- Create setup and trial fees so your customers can try out your services or product before committing to a monthly subscription
If you’re curious if Gravity Forms would work for you, sign up for a free personalized demo and explore all of the features.
Final Thoughts
Recurring fees create a predictable and reliable income stream for your business. The only thing left to do now is to implement these tips within your own business and create an effective recurring revenue stream.
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