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Doing business is not a static endeavor. A good business model respects the dynamic aspects of doing business which mainly means that revenue generation is supposed to be recurring rather than inconsistent. Depending on a business type and size there are various strategies and suggestions for generating recurring revenues.

On the most general level, there are two ways for achieving these business trends. One way is intensive advertising which is aimed at big markets (usually on national, regional and global scales) and which is usually pursued by large companies that have enough resources and production scale which make it feasible and desirable for them to incur the high costs of advertising. Another way is by starting with a small number of customers, reaching some scale and then keeping the loyal base of customers by maintaining high standards of a product/service and respecting customer needs. Of course these two strategies are not completely separated and have much in common. For instance, both of them have to respect consumer preferences and have to maintain relevant standards for their products/services.

For an SME, a preferred strategy is the second one as SME cannot afford high advertising costs. Since big companies are usually better advertised than SME and are also are more cost efficient it is important for SME to offer to the customers products/services which are better tailored to their needs compared to products/services offered by big companies. As SME are usually focused on the small markets they have an advantage in learning their customers’ needs more precisely and catering to them individually. This makes SME competitive to big companies and allows for their existence.

Once customer needs are identified and a product/service is offered, SME needs to maintain loyalty of its customers in order to maintain stream of revenue. To this end, SME should keep good relations with their customers and respect their needs on an individual basis.

Respecting customer needs on an individual basis is usually easier for SME compared to big companies as SME are usually closer to their customer base (geographically, culturally and in terms of interpersonal relations) and also have more flexibility in changing product/service characteristics. For instance, if McDonalds decided to change even a small detail in the recipe of its cheeseburger then it will need to incur tremendous costs for this (retrain all the staff around the world, change standards, advertise, etc.) while a local restaurant can change the entire menu overnight. This kind of flexibility is a really important advantage for SMEs which allows them to follow their customer needs step by step thus remaining competitive, maintaining a loyal customer base and ensuring recurring revenues.

In summary; the lesson is that in order to ensure recurring revenues for your SME you will need to find a niche where you can be more flexible than big competitors. In addition, the niche should not be overcrowded by existing SME because in this case it is difficult to differentiate your product/service.

If you would like to learn more about specific ways for generating recurring revenues in your SME then subscribe for the newsletter right now for free and win the E-book “How to prepare your business for AEC.”

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