Question
How do you create a recurring revenue business?
Answer
It’s actually the topic of a new book coming out in February 2015, The Automatic Customer: Creating a Subscription Business in Any Industry. There are nine different subscription models we identified in The Automatic Customer. One model that lends itself really well to the personal services businesses, is the simplifier model. The simplifier model says that consumers are busy and, in many cases, they would rather you automatically put the relationship on autopilot.
For example, if you have a swimming pool, the last thing you want to have to worry about is calling a company in to do the chemical rejuggling every two weeks. That’s a natural way to create a simplifier subscription model which says basically, "Look, we’re going to come every two weeks preemptively to make sure your water chemicals are adjusted correctly. You won’t have to call us and we’ll do that on a subscription basis."
In the construction industry, an example of that would be Hassle Free Home Service Inc. started by Jim Vagonis, who was a contractor. He dealt with the traditional ups and downs of the contractor business cycle, where one day you’re overworked and the next day, you’re underemployed. So Jim approached home owners and said, "We’re going to proactively manage your home for you. We’ll come and replace the furnace filters in the fall. We’ll do the all needed maintenance in the spring. We’ll make sure the tiles in the roof are fixed, etc., and we’ll do that for one fixed monthly fee once a month."
That is a simplifier model. It is one of the nine that a construction company could choose from which are detailed in my book coming out in February 2015.
For example, if you have a swimming pool, the last thing you want to have to worry about is calling a company in to do the chemical rejuggling every two weeks. That’s a natural way to create a simplifier subscription model which says basically, "Look, we’re going to come every two weeks preemptively to make sure your water chemicals are adjusted correctly. You won’t have to call us and we’ll do that on a subscription basis."
In the construction industry, an example of that would be Hassle Free Home Service Inc. started by Jim Vagonis, who was a contractor. He dealt with the traditional ups and downs of the contractor business cycle, where one day you’re overworked and the next day, you’re underemployed. So Jim approached home owners and said, "We’re going to proactively manage your home for you. We’ll come and replace the furnace filters in the fall. We’ll do the all needed maintenance in the spring. We’ll make sure the tiles in the roof are fixed, etc., and we’ll do that for one fixed monthly fee once a month."
That is a simplifier model. It is one of the nine that a construction company could choose from which are detailed in my book coming out in February 2015.
Tags
Written by John Warrillow

John Warrillow is the founder of The Sellability Score and author of the book "Built to Sell: Creating a Business That Can Thrive Without You". Throughout his career, John has started and exited four companies and is a sought-after speaker and angel investor.
John's new book, The Automatic Customer: Creating a Subscription Business in Any Industry, is scheduled to be released in February 2015.
More Q&As from our experts
- What are the most important financial metrics to monitor when planning for an exit?
- How does recurring revenue affect business valuation?
- What’s the single best thing a business owner can do to prepare a company for sale?
Related Terms
Related Articles
Term of the Day
Economies of scope are efficiencies that a buyer may gain post-acquisition by increasing the scope of certain combined...
Read Full Term
Subscribe To the Divestopedia Newsletter!
Stay on top of new content from Divestopedia.com. Join one of our email newsletters and get the latest insights about selling your business in your inbox every week.
Resources
- Divestopedia’s M&A Fee Guide 2022 - 2023
- Purchase and Sale Agreement Considerations for Acquirers - Handouts
- Seyfarth Shaw LLP - Survey of Key M&A Middle Market Deal Terms
- Firmex’s M&A Fee Guide 2021 - 2022
- Your Guide to VC Funding
- Financial Services M&A: Consolidation & Innovation January 2021
- SS&C Intralinks® 2021 Corporate Restructuring Report