The Fierce Business Babe Podcast Ep 89: Creating Monthly Recurring Revenue
In today’s episode we'll be discussing Monthly Recurring Revenue. I will be diving deep into what monthly recurring revenue is, how you can add it in your business, some great examples, how you can track it and so much more!
Creating Monthly Recurring Revenue
By: Melissa Lin
So today I'm going to be diving into a topic that you're probably hearing more and more entrepreneurs talk about, which is monthly recurring revenue. You probably saw it in the title of this blog post as well. This is something that my team and I are continuously working on adding to, but before I dig into this, let me share with you just what in the world monthly recurring revenue is. We like to shorten this with MRR and why this is important as a business owner, as a business, to know what this is, the ins and outs of how you can create it and more.
So, how important are your numbers? Really? I remember when I first started my business, I was not looking at numbers. I wasn't the best at keeping track of my sales. I wasn't the best at keeping track of my expenses and I had no idea at all. Seriously. I really had no idea what monthly recurring Revenue was when I first started in 2014, so I was really kind of flying off the seat of my pants. And now, of course years later, it's not necessarily the case anymore. I have learned so much over the years and I'm here today to sprinkle some of that knowledge into your ears. So I hope you're ready.
I first want to start with just the definition of monthly recurring Revenue. I'm going to start to shorten this to MRR so I’m not saying that over and over. Try saying that three times fast. Monthly recurring Revenue, monthly recurring Revenue, monthly recurring revenue. What it is is that the normalized measure of your business’s predictable Revenue. Yes, predictable Revenue that you can expect to bring in every single month. So you've already signed those clients. We've sold those packages. So, you know for a fact that that money is guaranteed to come in. As a business owner, all numbers are important. You've probably heard me say this over and over if you've listened to my podcasts before. Your numbers in your business tell a story and MRR is important because it helps you predict your business. Which yes, this is possible. I've had so many clients come to me like “Melissa, How do you predict your business? I never know how much is going to be coming in each month?” Well, MRR is one of those key factors to predicting what's going to be coming up in our business the next few months. So inside of my business we have guaranteed cash flow coming into the business through the rest of the year and even into 2021. So yeah, even in 2021, because we've created monthly recurring Revenue already in our business and you can do the same. So let's dive into an example.
So for example, let's say that you have 10 clients that pay you $100 per month for your membership. This would provide you 10 clients at $100 per month. This would provide you with $1,000 in monthly recurring Revenue, MRR, every single month. You've got that $1,000 guaranteed to come in, you know that's coming in. As a business owner, It is smart to create multiple streams of income. These different streams can help stack on top of each other and I like to call this creating stackable income in your business. For example, let's say this month, you're launching your mid-level offer, a group coaching program or some type of program for $3,000, and you enroll 10 clients into this program. If typically and I want to make a small note, this is definitely going to be different for each business owner. So look at your own data, because your numbers tell a story. Look at your own data to determine what this actually looks like for you, but let's say that like 40% of your clients typically pay in full and then let's say maybe 60% of your clients typically utilize your payment plan. You can start to map out what your monthly recurring Revenue would look like because you know that out of those 10 clients that are signing up, six of them will most likely opt in to your payment plan. So there is income you're bringing in and then the other four are going to pay in full. So now you can start to stack that income by adding another Revenue Source next month, with your next offer, and each month continue to stack on top of that. So you can start to see those six that are paying on payment plans. Now depending on how much your payment plans are each month you'll probably add some interest on it and we always add interest and that's what I teach my clients to do as well. at interest on your payment plans because you are a business. Lets say, you know those six clients and What your payment plans will create (x amount each month for the next however long that payment plan is) if say, its a six-month payment plan. You're going to be bringing in that money every single month for 6 months guaranteed, If you were to add nothing else for the next 6 months. So, you see, as you start to add more programs, more things, more payment plans and more offers every single month, You can start to stack on top of that and it's so incredible. You can start to stack on top of it with those other offers that you're starting to create.
Let me go into what my favorite way to stack income each month is. I love utilizing this, and you probably know this cuz you know, I'm an expert at it, definitely launching. I love utilizing launching as a tool to help create additional revenue streams in my business and very easily. So I can go to sleep and wake up with new sales. I’m adding more into my monthly recurring Revenue. Launching helps me create more MRR, while working less, and I absolutely love that. That's not going to be for everybody, some of us want to run businesses differently and that's totally okay. But the way I want to run my business, I want to have more freedom of time and freedom of money. The launching really helps me do that in my business. So let's brainstorm together a few ways that you can create monthly recurring Revenue in your business.
Now one way that you can do this is by creating some type of low ticket membership. Memberships are a great way to create MRR. You could keep doors open and turn this into an evergreen model or you could open the doors only a few days each month. Both models work and it's going to help you generate additional Revenue every single month as you opt more members inside of your membership? You're increasing that MRR, that monthly recurring Revenue.
So the second one is group coaching programs, with adding payment plans. As mentioned earlier, having payment plans can help you create that MRR and know that you have guaranteed cash flow each month. So a fun fact, with extended payment plans you're able to create more MRR and you're also more likely to have higher enrollment rates as well. One thing that we incorporate into our lunches is adding extended payment plans because that typically adds higher enrollment rates as well. Typically more people are going to want to go towards the payment plan depending on what their finances look like, when they get paid, that type of thing.
If you're looking for a fast cash injection to your business, adding a few private coaching spots will help you do this. So I only work with three or four private clients at one time throughout the year. And any time I open spots, they typically fill in less than one week because it's so rare for me to have a private spot open. So this is a very quick way to inject cash into your business, pay in full and also MRR, with a payment plan to have as an option.
So now that you know what MRR is, let's start to get into how do we start to track it? You know what MRR is, you know how you can start to generate more MRR, we talked about a few different ideas, and now let's get into actually tracking it and what works best for us. So over here at Melissa Lin headquarters, We like to keep things very simple and we always have, my team and I, we love tracking our MRR in an Excel sheet. Yeah. We like to see things simply. We also like to look at where most of our MRR is coming from and strategize ways to increase that. So in Excel sheets, maybe add another sheet to your current Finance tracking sheet that you use or your company metric sheets. We have it attached to our finance and expenses tracking sheet that we have in our business. Start adding a network recurring Revenue each month. So, you know map out each month through the rest of the year, every month, and start to put those numbers in that, so that you know for a fact already how much is coming in each month. then you can start to get strategic about it. Like Okay, I want to launch this course or I'm going to have this many spots open so I can hit this income goal. So start adding in that recurring Revenue each month so you know exactly how much is going to be coming in. Then continue to add to it as you generate more sales, this month and next month, then in the month after.
I want to give you a challenge, something for you to do today. I love doing this to my clients. We always do these little challenges and how we can create some more income because why wouldn’t we want to. Now here's a challenge for you. How can you generate an extra $1,000 per month in monthly recurring Revenue? As I mentioned, I love asking my clients this and challenging them and now it's your turn. So I'll give you some examples of what you could do. You could add in let's say two clients spots for Voxer access with you at $500 a month. Boom. There's $1,000 right there that you didn't have previously that you can now add and as MRR. Let’s say that you have a course, You haven’t opened in quite some time, Maybe once per month you open it up for two days or one day and it's a 497 course. All you gotta do is sell two of those every month to create an additional thousand dollars. So challenge yourself today and ask yourself. “Okay, how can I generate an extra $1,000 this month? Where can that come from? What can that look like? And how can I continue to do that every single month?” Once you do that, what you can do is, next time challenge yourself. Okay, how can I create an additional two thousand, five thousand, ten thousand and on and on and on as you continue to scale. Now as you're doing that challenge, I would love to hear what you come up with. Send me a DM on Instagram at The Melissa Lin. I would love to hear how you answer this challenge and how you're going about it and be able to support you as well as you start to generate more money each month. I’m so excited for you.
Topics we cover include:
What Monthly Recurring Revenue Is
Stacking income
Adding Payment plans
Fast cash injections
Tracking your MRR
And so much more!
Times to check out:
(6:22) Monthly recurring revenue explained
(10:56) Best Ways to Stack Income
(12:40) Payment plans and MRR
(14:02) Tracking Your MRR
(15:57) Challenge Yourself
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