The Recurring Income Myth

Yaro is a serial entrepreneur, blogger, podcaster, angel investor and digital nomad.

A true ‘recurring income’ product or service doesn’t exist.

I say this even as right now I have several customers who have been paying a subscription to my company for over six years.

A long time ago I got real excited about having a subscription product or even a membership site.

Then as I began to sell these products and later services on subscription, I came to realize that it’s a bit of a false sense of security.

No recurring revenue source repeats forever.

What happens is you have a churn rate and a life time value (LTV).

You learn how long a customer keeps paying and what the lifetime value of a customer is.

So instead of seeing it as I make $97/month from my customers, you see it as customers on average last for 9 months and are worth $873.

Your mindset then moves to reducing churn/increasing stick rate, and adding upgrades and/or more products to sell to the same customers to increase the LTV.

I may have been naive all those years ago because I thought if I just got 1,000 customers paying me $100/m, my membership site would be a $100,000/month income stream.

What really happens is that you have a revolving door of people coming in and out.

There will always be a need for new customers because there will always be churn.

Recurring income is really just a way to increase LTV. It’s not a permanent cash flow source.

This led me to an insight that I’ve taken with me ever since:

Marketing never ends.

You will always need new customers if you want to grow.

That sentence might seem obvious, but I think many entrepreneurs underestimate the need to build a true marketing department in their company.

The only way to feed something that has a never ending hunger is to build a team of chefs who keep cooking interesting meals using the latest trends and technology.

If you don’t build your marketing department you will experience extreme ups and downs.

Your growth will be unpredictable.

Some weeks, no growth at all.

Nothing will happen without you.

You will curse every lost customer.

To break this cycle you need people who implement a process to keep leads coming in.

They do the experiments. They do the conversion rate optimizations. They do the content creation and distribution.

If this sounds relevant to you, your next step is to plan a build-out for your marketing department.

This includes the processes and the people to run them.

If you need help let me know.

Keep growing!

Yaro
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​P.S. I’ve been writing a lot recently on marketing and growth.

You can catch this content early on my LinkedIn, Facebook, X.com and Instagram accounts.

This subject is both the single most frustrating and satisfying part of my working life as an entrepreneur.

Growth is what we all strive for, yet each day is a small step often filled with challenges as we attempt to figure out what marketing channels work.

Years later, when you have a profitable business, the pay off is life changing.

It’s a daily grind to get there, and often the lack of success kills motivation.

This is why I have decided to turn the direction of my newsletter towards the topic of growth.

I even purchased a new domain name as I want a fresh brand.

I’ll share more soon as I roll out the rebrand. I’m excited!