How and Why You Should Add Recurring Revenue to Your Digital Agency

13 min read

The COVID-19 pandemic continues to upend what we might consider the “normal” course of business, despite the rollout of vaccines and other treatments across the world. The pandemic has shifted how and where we do business and has served as a wake-up call for many businesses to increase and diversify their revenue streams.

This push to find new ways of making revenue has also extended to digital agencies, many of whom have seen their businesses threatened by the unpredictability the pandemic has wrought on the economy.

Even before the COVID-19 pandemic took hold, digital agencies faced a constant revenue balancing act of pushing to attract new business while also working to keep their current clients. And since the onset of the pandemic, this struggle has been magnified as customers scale back or pivot their business needs, leading many digital agencies to wonder how they can support and grow their current revenue.

So what’s the best way to go about attracting new and different revenue?

Many companies have turned to recurring revenue strategies to ensure that regular income is flowing into their businesses. But just what is recurring revenue? And is it right for your agency?

What is recurring revenue?

Recurring revenue is revenue you receive on a regular basis, most typically monthly, but it can also be bi-weekly, annually, or some other set period of time. This type of revenue is often associated with subscriptions wherein a customer pays a fee every month for access to your services for that month.

An easy example of this would be a streaming content library service such as Netflix. For access to this company’s services, you pay a set fee at a regular, recurring interval — that is, every month. In turn, Netflix earns revenue on a recurring basis.

Recurring revenue contrasts with other more traditional types of revenue that are paid on a one-time basis in relation to a service. For example, if a pipe bursts in your home, you’d pay a plumber once for the work they did to repair the pipe; when the job is done, so is your paying of the plumber.

Now, for digital agencies, the services you’d be providing that would generate recurring revenue can vary, but they’d likely include things like:

  • Social media management
  • Consultancy or advisory services
  • Content marketing subscriptions
  • Website management

So now that we know what recurring revenue is, let’s look at a few reasons why recurring revenue can be good (as well as bad) for your digital agency.

Pros of recurring revenue

Less stress for you

Let’s face it: finding new customers is tough. But unfortunately that’s the task at hand for many agencies that don’t have recurring revenue streams — continually generating new business by attracting and converting more and more customers to make sure ends meet each month. But just because you’re hustling and grinding to find new clients does not mean they’ll start paying for your services, which can mean a lot of time, effort and stress with nothing to show for it.

With recurring revenue, some of that stress is alleviated by the fact that even if you don’t attract any new business in a given month, you’ll still be drawing in some money from those that have subscribed to your services. Without feeling the constant push and pull of trying to draw in and sign up new customers, you can focus on attracting new clients who are right for your business and delivering top quality services to your current clientele.

More revenue for business investment and growth

The biggest benefit of recurring revenue is that it brings in more revenue for your business, plain and simple. Along with the money you’re taking in from normal sales of your core business services, you’re supplementing that revenue with other cash streams that allow you to invest in the areas of your business that need it.

If you need new technology or hardware, more employees, new software, or a bigger office space, having more money on hand will enable you to invest in your business and scale up to keep up with demand more quickly. Whereas previously investing in your business might’ve felt like a pipe dream, having recurring revenue can build up your coffers and make those dreams a reality.

More cash on hand for emergencies

On the other hand, maybe you’d like a little extra cash in the bank for an unforeseen business downturn. The COVID-19 pandemic has certain taught us that unexpected disruptors can become reality quicker than we can anticipate or our business can handle, and that having a little financial wiggle room can be a godsend when you don’t know when things will get back to “normal.”

So, if your business is experiencing unanticipated upheaval or sales are slowing down, having an extra financial cushion to pay wages, office space rent, or whatever other bills are coming due can be a real lifesaver for you, your business, your employees — and your customers.

Opportunity to build out your service suite

Aside from having more money on hand for company needs as well as things you want for your business, launching recurring revenue streams gives you the chance to build out the services you provide customers beyond just your core business offerings.

Perhaps you’re interested in building your brand but aren’t ready to take on more clients for your core services, so you’re considering advisory or consultancy services. Or maybe you really enjoy getting your customers’ websites just right, and so you want to offer website management subscriptions as a way to grow your client base. Obviously doing these things will net you more and more revenue, but it also allows you to build out the suite of services you offer and expose you to more customers.

More upsell opportunities

Adding recurring revenue streams and the additional services they’re based on also gives you more chances to add to the business you’re already doing with current clients. Regardless of why or what it is that’s drawn your current customer base to do business with you — maybe it’s the snappy email marketing campaigns you’ve come up with, maybe it’s the brilliant website management you’ve done — these customers represent an opportunity to do even more business through upselling.

For example, if you’re launching a new social media management subscription, review your current customers and see which of them aren’t yet paying for this service. Reach out to them and let them know you’re now offering this as a recurring service and gauge their interest in a subscription. These customers already know and love the work that you’re doing, so they’ll be likely to want to do even more business with you.

Cons of recurring revenue

More upkeep involved in providing new services

While having guaranteed monthly income is likely a very attractive option, it also means there will be guaranteed monthly work for your agency. With recurring revenue and the subscription-based services that typically accompany it, you’re committing yourself to a certain amount of work to keep up with those services.

Instead of projects being done and off of your plate once you’ve completed them, the projects remain ongoing until the customer no longer wants the services. So every month, you’ll have to factor in the amount of time you’ll need to take care of these monthly services on top of the non-subscription work you’ll be doing, which can quickly get overwhelming.

Less time to focus on core business services

On the flipside, more time being required for these recurring services means you’ll have less time to work on the other core services that your customers expect from you and that established your business in the first place. You’ll have to be honest with yourself to determine whether or not you have the time and bandwidth to take on these types of projects.

The last thing you’ll want to do is to sign agreements with customers to provide recurring services on top of your other business and then quickly find that you simply don’t have enough time to do them (or hire people to scale up quickly enough). Then, the quality of both types of the work you’re doing will suffer and your customer base could wither.

Where does ecommerce fit in?

Unlike some of the ideas we’ve discussed above, white label services are an easy way to generate recurring revenue without requiring the same time or upkeep commitment as other services you may be considering.

White-labelled ecommerce, for instance, enables you to resell ecommerce entirely under your own branding and logos, with no mention of the ecommerce platform you’re reselling — and none of the work that goes into launching and running an ecommerce platform.

Including ecommerce in your offerings to clients is a great way to grow another revenue stream without eating up too much of your bandwidth or resources. Your clients will assume you’re offering your own homegrown ecommerce solution, while you get to resell a fully developed platform without any development or maintenance.

At Ecwid, we provide a range of partnership options and levels so that you can find the way to provide ecommerce services to your clients that makes sense for your business — including our white label solutions.

With our white label options, you can resell Ecwid’s cloud-hosted, industry-leading ecommerce platform with minimal involvement and investment from your end. And through our reseller partnerships, you can purchase Ecwid store plans at deep discounts and resell them to your clients at whatever price you choose — bringing in regular, substantial revenue for your business without drawing you away from your core business services.

Is recurring revenue right for my business?

So how do you know if generating recurring revenue and providing subscription-based services is the right move for your company? It’s time to take a good, hard look at your business.

After establishing your niche in the market, are you having trouble attracting new customers each month? Does what you do each month feel a little stagnant and lead you to seek out new challenges? Do you have enough cash on hand or in your account to weather a prolonged, maybe months-long disruption to your business? Do you have enough time and manpower to take on another style of business that contrasts with what got you here?

Only you can answer these questions and determine the best way forward for your company.

We hope this discussion of recurring revenue has been insightful for you. If you’re ready to add a new source of recurring revenue, learn more about our white label ecommerce partnership.

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About the author

Colin Thompson is a content writer at Ecwid. He writes about marketing, business development, and promotion for our Ecwid Partners. He loves cats, Chicago sports, deep dish pizza and going on hikes.

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