One of the strategic decisions I see on a regular basis is a change in the direction a start-up business will take in order to provide a solution to any number of perceived problems. It’s what start-up do and it means their business model typically pivots a number of times before they get the mix right. Start-ups have a significant advantage in agility, they can fix any number of problems, however they have a significant disadvantage in focus, or more correctly ensuring they only focus on the solution that will provide the most return. What I find interesting is those start-ups who pivot and re-pivot ultimately move towards a recurring revenue model over a one time fee.
This isn’t limited to start-ups but can apply to any service related business, but it’s not as easy as simply saying lets charge an initial fee and then an ongoing maintenance / recurring fee. Your business solution has to continually add value or eliminate risk in order to be worthy of recurring revenues otherwise you’ll be stuck in one time fee land.
The advantages of a move to a recurring revenue model are many, predictable cash flow, perpetual earnings, It enables business scale and scale enables business sale.
All that sounds good but how do you go about pivoting to a recurring revenue model.