The Numbers You Need to Know to Make Recurring Revenue Work

Many entrepreneurs turn to membership sites to generate recurring (or "passive") revenue.

Entrepreneurs are taking a cue from businesses like gyms to add automatic, recurring membership to their business model. They're doing this by creating membership sites where clients pay a monthly fee to have access to training calls and private forums, charging a monthly fee fora daily 20% off store discount or a program where customers receive a package with set amount of product per month.

A good idea in theory, but how do you make it work?

Pay attention to your Key Performance Indicators (KPIs). Put simply: Know your numbers.

• Number of subscribers: Have your team goal be on improving this number. Send it out in a morning e-mail, post it in a public place or be sure to alert your virtual assistant.

• Churn rate: In addition to your member count, be sure that you're reviewing how many members have stayed in the program and the number of cancellations. Retaining current members will always be more cost-effective than acquiring new ones. Consider giving members a bonus, gift or surprise in varying intervals to ensure their retention.

• Lifetime value of members: For one client, we calculated that his $97/monthly membership could profit up to $3,492 for members who had been with him since the beginning. From there, we were able to calculate how much he could spend on advertising and marketing to acquire new members, have a steady return on investment and still turn a profit. (Tip: Be sure to calculate the average value to guide your spending).

Once you know these KPIs, your membership program will be the recurring, passive revenue you intended it to be. It's how you win the recurring revenue game.