Episode 79:Recurring Revenue
In this episode, Nick and Kai discuss recurring revenue for freelancers and consultants: What are the different options for recurring revenue in your business? Taylor Swift is mentioned exactly once.
Summary
Nick and Kai work through how independent consultants can build recurring revenue, using Draft Revise and Kai’s podcast outreach service as live examples. The core of the episode is a four-criteria framework Kai proposes for evaluating recurring offerings, followed by a detour into selling fixed-scope weekly sprints as a cash-flow-adjacent alternative.
Highlights
- Kai’s four criteria for evaluating a recurring revenue idea: ease of demand validation, ease of launch with existing tools, return relative to time spent, and predictability, quarterly billing beats week-to-week because people can’t cancel after two payments.
- Nick says at least 60% of Draft’s revenue over five years has been recurring, which he credits for keeping the business solvent.
- Kai’s method for brainstorming recurring services: list 10 to 20 services adjacent to your core offering, then filter for ones with a consistent monthly need. That process is how he landed on podcast outreach as a link-building retainer.
- Nick arrived at Draft Revise by finding the overlap of things he could charge on a monthly retainer and UX-related services. A/B testing fit because it requires design decisions that produce measurable revenue impact, so he’s still doing design work.
- Kai says you validate price and scope by scanning what competitors charge. For a paid print newsletter, that’s the $25 to $100 per issue range; for monthly SEO audits, it’s $500 to $5,000. That gives you confirmation people pay for it and a workable price band.
- High churn after the first month means the product isn’t solving a problem people value enough to keep paying for.
- Selling fixed-scope weekly sprints and pitching follow-on weeks to the same client is a one-off alternative that produces similar cash flow without requiring a formal subscription structure.
Read the transcript
I continue to have bad news here. People are listening to the podcast. Not only are they listening to the podcast, but they have questions. Yeah, I know, I know. I think they’re like demanding some answers from us about
Why we did position this as an advice podcast.
Did we?
I honestly haven’t read our website.
I’m more like Herman T’s Weibel about it. Like I’m offering information and also being a lunatic.
I’m more wily coyote about it.
What does that mean?
I’m ordering a lot of stuff from Acme and I’m trying to catch that damned roadrunner.
Yeah, yeah. Acme is kind of like Amazon. com, isn’t it? It really is. It’s a website. Yeah. So what the what was the question?
I think you wrote down the question.
How do you get recurring revenue from a variety of different products as a consultant in order to beat Feast or famine, I believe. Yeah, yeah.
What are the best strategies for establishing recurring revenue streams for independent consultants and freelancers?
We’ve talked about passive income before.
Right, like that’s that’s a thing, but I think passive income, like uh, e-book sales while you sleep, core sales while you sleep. It’s different than recurring revenue because with recurring revenue, there’s really a focus on, well, I’m still doing work, but It’s not passive. It’s subscription-based. It’s monthly payments. I mean, DraftRevise is a perfect example of this. People are paying you fixed fees on a quarterly basis. To do a thing, not tied to time, but tied to we’re doing a range of A-B tests and reporting to improve adult results.
Yes.
But not X hours a week.
Right, right. And nobody is tracking my time, least of all me, right? Like I’m doing whatever I want. But there’s also other forms of this, right? Like there’s the the kind of productized consulting service that I think we’re discussing, or like a retainer or something like that, but there’s also like Revised Weekly, right? So and I literally just one morning a week write up a 1,000 plus word lesson about A-B testing in some capacity. And they all build on themselves and they’re all part of a piece. And they talk about kind of the mindset shift that’s necessary. There’s draft analysis where you pay $125 and I’m not getting recurring revenue from it, but you get a year of content, right? So you’re still kind of continually putting out a certain pace. Yeah.
So I think to answer the question of what the best options are, let’s apply some criteria to the question, some scoring for how we figure out what best is. So I’d suggest One factor is it’s easy to validate demand. You might be a consultant and say, well, hey, I love the idea of launching a monthly newsletter that’s paid. I’m going to have people pay for it. But if you don’t already have an existing mailing list or audience, it’s going to be difficult to sell. So how easy it is to validate it really comes into play. Another factor is how easy it is to launch it. Can you use existing tools and systems off the shelf to just JFS, just fucking ship it? and get it out the doors are going to take three months to build your own courseware. Another option would be, I think, leverage. How lucrative is it versus the time that you have to put into it? If it takes 100 hours and you make $100 versus if it takes 10 minutes and you make $100, your effective hourly rate is going to be drastically different. We want to focus on opportunities that are more highly leveraged for us at our business. Yeah, more efficient, right?
Like if you think about your hourly rate in terms of this, which you shouldn’t have one, but You know, assuming you had one, right? You’re getting a thousand dollars an hour, and the other 50 minutes you get to spend on the beach, which is great. Congratulations! Enjoy your beach.
Final criteria I’d sort of add in there: stability and predictability. We want low-variance offerings. We want something where people will show up, like with Jack Revise. They’re paying a quarter at a time. You know, okay, great. Average engagement might be six, nine, twelve months, but at least this person’s on board for three months. Not okay, great. Once a week, they’re going to pay. Oh, they canceled after two weeks. Shit.
Yeah, then that’s common, right? Like high churn after the first month is a sign that your product is not that desirable.
Not that valuable. Not solving a big problem.
Not that valuable. I mean, it’s both, right? Like people design. Desire things that they value. So I think that kind of are of a piece that you can argue there. But yeah, yeah.
So when we think about the different ways, I mean Easy to validate, I think, is the first question. And we validate by looking at what our market, what our target market positioning. Please listen to our previous episodes on positioning. What your target market is experiencing, what problems they’re experiencing and what they’re looking to pay for. And I think you validate demand first by seeing, well, what are the pains and problems? And second, What sort of solutions are already out there around the recurring price point I’m targeting that people are paying for? So it’s easy to say, well, I want to launch a print newsletter that people subscribe to. You look around and you see it varies between twenty five and a hundred dollars an issue. Okay, great, that gives you an idea of A, there’s a demand people are paying for this, and B, what you could earn from it. If you’re launching a recurring productized service or a recurring consulting service, look around and see, oh, wow, people pay $500,000 to $5,000 for monthly SEO audits and tune-ups or traffic analysis. Okay, great. That gives you a range, that gives you an idea of the scope. But we validated both price, scope, and demand by looking at competitors and looking at the market and seeing what people will and are paying for.
Yeah, I mean, a lot of this is getting a little bit away from the recurring revenue. It’s coming up with something that people want to buy, which is pretty foundational. You should come up with something people want to buy. But I think there’s something more detailed in what you’re talking about, which is something people want to buy frequently. How many times, Kai, have you seen like get rid of recurring charges on your credit card like things, right? So that speaks to me that there’s a broadly felt pain that people are getting dinged repeatedly by something that sucks. Right? And don’t be that thing, right? Don’t be the thing that people because people are always on the warpath to kill off recurring charges. And at the same time, recurring charges are the thing that’s going to leverage maximal value for you and your business. Oh, God, how much of drafts revenue has been recurring in the past five years. It’s something like at least 60%, I imagine, higher. So that matters tremendously much to me and to my solvency as a business and being able to talk into this microphone I bought, you know, like all of that, all of it matters.
So what are the easiest ways to establish recurring revenue? I think look at the here’s how I actually did it for my business four or five years ago when I tried to figure out a recurring service. I looked at the standard sort of peak service I was selling, a website teardown, an SEO audit. And I asked, okay, What are related services that somebody would buy if they had just purchased an SEO audit, just applying like the Amazon related product methodology? And I said, okay, people might need link building, people might need outreach, people might need keyword optimizations. I brainstormed a list of 10 to 20 different things. And I said, okay, great. Which of these are things where there’s a consistent monthly demand, where a buyer needs the outcome or the output of it every month? And going through my list, I was like, oh, keyword optimization. Yeah, kind of link building. Oh, no. Sites, yeah, you know, I advise people to try to earn 10 to 20 new unique links to their site every month. There’s a monthly demand. There’s a monthly need for it. You want to be a long-term relationship. You want long-term outcomes. It’s easily productized. Huh, this seems like a good recurring service. And this is actually how. I came up with outreach and then podcast outreach as a way to fulfill, hey, let’s get X links per month. So I think this is sort of a mental framework you could work through. To identify potential sources of recurring revenue, you need to do the market validation step, but this helps you brainstorm them.
Yeah, yeah. I mean, that was, I mean, how many people have asked me the question: how did you come up with draft revise? I’ll say this on this podcast for the 5,000th time. I basically came up with the Venn diagram overlap of things I can charge on Mauerly Retainer. And UXE-related services. I have a design background. I do interaction design. I still, in the year of our Lord twenty seventeen, practice interaction design for a living. And so I thought A-B testing was a pretty sweet spot because it allowed you to measure the impact of a design decision. In order to measure the impact, you have to come up with design decisions. And in order to do that, you have to practice design. So I’m still doing design, right? But it’s in the service of a revenue generating action that you can A-B test and measure more effectively. That’s the short of it. But in that is kind of what you’re saying, Kai, where I, you know, thought about you’re effectively establishing a series of constraints on a problem, right? Like you’re saying. It has to be leveraged on a monthly basis in a way that people will value. Both of those things are pretty big constraints, right?
And I think working within constraints is valuable. It gives you a scope you need to play within. And Constraints let you come up with interesting ideas. Thinking about the question a little more: how do we establish recurring revenue? I think there’s an interesting direction we could take it in where the outcome we’re searching for is How can I, with a single client, have a higher lifetime value of the client and have the client pay me over time? Well, we could flip that around to how can you sell one-off projects like hire me for a week for this fixed rate? but sell it multiple times to clients. I think we’re overlooking or in the quest for recurring revenue, we overlook, well, sell a one off service, but maybe a week of development time or a week of design or consulting time. But pitch it to the client of like, okay, great, this is going to be a three-week project, or I’m available for week-long sprints on marketing or development, buy up a week or multiple weeks at a time. and it generates for you that same recurring revenue, but by selling a fixed price, fixed scope service as a one off charge, you just get really good at, okay, great. Do you want to buy another week? How could we extend this project? How could I continue to help you?
Yeah, yeah. It’s also a good thing to leverage like ongoing contracts, right? Like you do site setup and then you switch it into a maintenance fee, something like that. Maintenance retainers are probably a whole separate episode of this podcast, but they are Lucrative and wonderful, and very difficult to pull off. And there are a lot of tactical things you need to be thinking about. And what’s probably going to happen for your first year of doing this is You’re going to lose a lot of maintenance retainers and learn stuff about the whole process.
And honestly, I’d say that’s true for any recurring offering you launch. You’re going to have. You’re going to start out undercharging from what you will eventually be charging. You’re going to have high churn early on. You’re going to have a few too many clients early on if it takes off just because You’re learning the scope, and again, you’re undercharging compared to what you eventually will be charging for the value provided. But it’s all in service of learning more about the service you’re selling. It’s all about becoming a better business owner.
Yeah, and understanding. I mean, I saw a post about like some people are just good at getting money. Like 50 cents is the example that this person cited of all people. And he’s kind of like a serial entrepreneur. Like he knows, and at one point, like 50 Cent was just like, I’ll shovel your driveway for a hundred bucks. For a hundred bucks. And like. I don’t know. I think if you plowed in Chicago, it would cost more than $100. My hourly rate, it would be way more than $100.
Yep.
Right. So that’s something like Vifty Sun is constantly thinking, oh, it’s a snowstorm. I’m not going to get out the hot chocolate and glog. I’m going to go shovel people’s driveways for $100 because I’m going to get that money.
And honestly, like on this aside, readers, read profiles, read case studies, read biographies, read articles on 50 Cent heap. Very much has a true hustler entrepreneur’s mentality. And it’s an amazing case study of how to make money. I mean, his vitamin water deal, I think, is a major source of revenue or was a major source of his fortune. And It paid off well, and it’s not his music business. It’s the ancillary products. But rabbit hole on 50 Cent aside.
I mean, it’s not even 50 cent. Like if you look at Jay-Z, right? He just came out with an album today as of recording this podcast. He became Rap’s first billionaire by doing like incredibly shrewd marketing deals with like Samsung. Yep. And Pitchfork laid it all out in a blog post at one point. It was just like, here’s how he did this. Why aren’t you doing that with your consulting practice? This is an actual question. It sounds absurd to be comparing all of this to Jay-Z and 50 Cent, but Within that is a process of constantly figuring out ways to provide value and get paid for it. And if you’re not thinking about that, like Why are you in the game?
You know who my number one business inspiration right now is?
Taylor Swift.
Bingo, T-Swift, T-Dog.
Right. I fear Taylor Swift.
Yes, as you should.
Right. Present.