In the midst of ongoing reports of layoffs, bank failures, and surging inflation, commercial cleaning businesses are finding solace in the stability of recurring revenue to withstand the turbulence affecting the economy.
Understanding recurring revenue
Recurring revenue is the predictable and regular income a business generates from ongoing customer subscriptions, contracts, or repeat sales. It gives businesses a more stable and predictable cash flow and reduces reliance on one-time sales or sporadic transactions. It establishes a foundation of consistent income for the business.
It costs a company more to acquire new customers than to sell to their existing clients, so recurring revenue saves you time and money. In fact, companies are 60 to 70 per cent more likely to sell to an existing customer than a new client, and existing customers are more likely to try new products and services.
The bulk of the cleaning industry’s business model is built on generating regular repeat business. Providing comprehensive cleanings, protection against germs and bacteria, and improved air quality to your clients will encourage them to come back. Combining professional service with a responsive, personalized approach creates a relationship based on customer loyalty and repeat business.
Establishing lasting relationships with your clients creates a compound effect. If 70 to 80 per cent of business is generated by recurring revenue, it means keeping teams employed, the business running fluidly, and continuing to drive growth.
In addition to helping drive profits, recurring revenue has numerous benefits to cleaning industry brands. It can positively impact a business by reducing employee turnover, boosting marketing efforts, and guaranteeing an impressive portfolio for future buyers when the time comes to retire.
Boosts customer lifetime value
Customer lifetime value is a vital metric that gauges the revenue a business anticipates from a customer. By focusing on retention strategies, you can enhance the lifetime value of your customers, which translates to increased repeat sales and consistent profits.
Customers are the building blocks of any successful small business. It’s important to continue to enhance your services and products to stay relevant as commercial cleaning demands evolve.
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Improves employee retention
One of the hurdles any business faces is building a competent roster of employees. Having consistent staff is especially important in the commercial cleaning industry, and there are about 335,500 openings for janitors and building cleaners each year, according to the U.S. Bureau of Labor Statistics. Employee retention is a factor in building revenue and retaining customers; companies want reliable cleaners, and providing consistent service creates trust.
Having recurring revenue enables your employees to establish relationships with customers and provides them with the steady paychecks needed to meet their financial targets. Their familiarity with a business can help them provide more thoughtful service. If your workers are happy, your business will thrive.
Facilitates growth
Recurring revenue allows business owners to generate a stable cash flow and predict future earnings. Having a solid picture of your cash flow enables you to scale a business with less risk so you can plan for a more stable and profitable future.
Enhances resale value
Investing in a cleaning business helps diversify your portfolio and is a valuable resource for retirement. Having an exit strategy will ensure you maximize your profit potential, and regular revenue boosts the value of your business to potential buyers. With a lineup of existing clients, new owners have an established roster and guaranteed income to get started, which may serve as a motivator if the time comes when you want to sell your business.
Reduces marketing expenditures
Recurring revenue also enables you to identify your target demographic and build customer loyalty, along with helping to streamline services by revealing customer preferences. Having established clients allows your marketing budget to remain steady at 10 to 15 per cent of your revenue target.
In addition, one of your best advertising tools is customer referrals. Word-of-mouth advertising helps grow your business. You may even want to offer a token of appreciation to your clients who provide referrals, as a thank you, and as an incentive to spread the word about your superior service.
Once you establish regular customers, raising prices can be challenging. Providing transparency and superior service will help offset customer concerns when such raises are necessary. The benefits of loyal business accounts make them an invaluable resource for the commercial cleaning industry during a rocky economic season.
Jessica Ruenz, vice president of Maid Right, has over 11 years of experience in the franchise industry as a brand leader and training professional. Her franchise coaching skills and ability to build manufacturing relationships make her an asset to the Premium Service Brands team.
