Clockwork Clients and Their Money
“Show me the money!” That infamous quote from Jerry McGuire always holds true when you’re a business owner. You want money…lots of it, and your business needs it. The best way to secure your business with a functioning cash flow is by setting up a recurring revenue program. If you’re wondering what that entails, here’s a rundown. Recurring revenues are the portion of your sales you can count on receiving from month to month, with some degree of certainty. This includes loyal clients coming in week after week for their standing appointments. It’s the income your business can count on regularly. These revenues create a stable cash flow, contribute to client retention, increase your client base and ultimately strengthen your bottom line. No matter what type of business you are—a salon, a nail spa—chances are you can benefit from a recurring revenue program. Stephanie Jennings, VP of Sales at MINDBODY shares how this program can work for your business.
How It Works
In general, businesses that incorporate a recurring revenue model make more money than pay-by-the-service revenue models. Additionally, pay-by-the-service strategies usually have a negative impact on client retention because your clients haven’t committed themselves—either financially or emotionally—to your business long term.
You may be thinking, “But aren’t recurring revenues just for businesses that offer long-term contracts or annual memberships? I provide [insert service type here], so this strategy won’t work for me, will it?”
Actually, it will! Recurring revenues, also known auto-pays, electronic funds transfers or membership contracts, can be structured to work in a wide variety of environments such as salons and spas. Best of all, you can be creative. Rather than selling ad hoc appointments or services, create a monthly fee (i.e., membership) for services in a select time period. For instance, spas or massage businesses can offer a facial-per-month or massage-a-month membership. Or for a salon, offering monthly touch-ups or bi-monthly trims with a retail discount.
Price it Right!
Plenty of businesses offer a monthly unlimited package with little or no results. The problem? The only people who sign up are ones that already attend/purchase frequently. To transform your business, you need to price auto-pays so that both Medium Users and High Users purchase it.
To price auto-pay, you need to start by looking at your numbers. Unfortunately, the reality is that most of your clients just don’t visit as often as you think they will, so don’t price your auto-pay based on what your gut tells you, or it will likely be too high. The best way to analyze what group your clients fall into is by categorizing them. If this isn’t an option with your current software, MINDBODY software allows you to run attendance and revenue reports at the touch of a button! A rough rule of thumb is:
– Low Users visit less than 2 times a month.
– Medium Users visit 3-7 times
– High Users 8-12 times
For appointment-based businesses, you can set auto-pays to renew automatically when a session package expires. Obviously, this isn’t an exact science. There are a couple of other things to consider when deciding the price. What is the competition doing? What are other similar businesses charging?
This all sounds well and good, right? But of course these packages won’t just sell themselves. You’ll need to do some legwork. First, create sales targets for you and your staff. For example, try to sell 10 auto-pays per week at $90 each for a recurring hair cut or salon treatment for the next four months. If you hit this goal, you’ve just created a stable monthly stream of $3,600 and boosted your annual revenue by $14,400.
One thing we’ve learned is that the auto-pays will sell better if you present them as limited-time offers – give them expiration dates!