Passive income models appear to be everywhere, yet most of these models fail to address how “Passive” is a misnomer. The old Theodore Roosevelt quote, Nothing worth having was ever achieved without effort definitely applies here. While there are ways to streamline your efforts and delegate responsibilities, this all requires some constant work and maintenance, which you can pay for or do yourself. A better description would be Recurring Revenue, as this does not imply a complete lack of effort.
While I do not see MLM as a legitimate business model, nor do I consider those in MLM down-streams as legitimate business owners, I figured I would briefly touch on this area, as it applies to the “top end” as a way for a manufacturer to get their product to market, without going through the traditional retail / distributor environment. When looking at selling your product through MLM, one must take into consideration the significant cost of marketing to dead weight. By this I mean those downstream dreamers who seem to think selling MLM is their ticket to the easy life. Much like employee's, a company using MLM as their sales model must invest in training and employee retention and there is nothing passive about this. Unlike employee's, however, MLM down-streamer mentality tends to care less about the product and more about selling it, at whatever cost. For this reason, your brand may suffer if you choose to take this path to reaching your clients.
Now back on topic, lets look at some of the traditional recurring revenue models for business. Plenty of companies rely on subscription product or recurring service contracts as part of their business model. The most common of these include telephone companies, internet providers, alarm companies, and now TV Streaming service providers and car sharing businesses have also added themselves to the list. There is really no limitation to what can be set up with a subscription model in place. I have even seen produce and meat subscriptions. The one thing all of these business models have in common is an expectation of service, on the part of the client / end user. Where it applies, there is also an expectation of the timely accessibility of support.
The other consideration, when looking at recurring revenue models is the billing component. Being in the security alarm industry and dealing with providing security alarm monitoring services in the Lower Mainland / Fraser Valley of British Columbia, I like to use a pre-authorized debit service. This allows me to automatically pull funds from client bank accounts, on a monthly basis. When I initially started, my Credit Union allowed me to tag onto their account and the loans officer would handle all the changes. As time went on and changes / additions became more frequent, I decided to set up a self managed plan. This enables me to make any changes directly, and I am not reliant on the holiday schedule of a third person to make regular changes. The fee for pre-authorized debits tend to be set up as a monthly charge for a set number of files. A file being s single client account consisting of their bank account information and debit amount. In my case I pay $20 CAD per month and this covers up to 300 files and two mass file releases per month. Each file release can consist of up to 300 individual files. Personally, I prefer this method as the billing amount is not based on a percentage of the transactions. In some cases processing is accomplished by logging into a secure banking portal, while some financial institutions may allow you to submit your charged directly through your accounting system. Personally, I prefer the log in method, as there is less room for failure.
Credit Card / Debit Card Processing Another common method of recurring transactions is setting up a merchant credit card / Debit card processing accounts. With so many credit cards and banking institutions as well as different fee's associated with accepting each, this can be a messy way of dealing with recurring transactions, as you will need to send individual transactions to each credit card company, plus you will need to have a merchant account with each credit card company, each of these may have a monthly fee as well as a percentage based or fixed transaction change. Your Financial Institution may be able to help guide you through this process. There are also third party processing services which make their money packaging and reselling credit card processing services. The fees charged can vary dramatically and due to their volume with the credit card companies, may end up being less than you would pay the credit card company if you were to sign up for credit card processing directly with each credit card company. The added benefit of this approach would be the ease of only having to deal with one processing centre. With the way technology has changed, many of these providers give you the ability to submit your charges directly through your accounting system. Some of these third party credit card processing services also process Debit Card transactions for you.
Cheques and E-transfers Of course there is also the standard invoicing and cheque method of billing for recurring transactions. While most people are opting for automated methods, many still prefer hard copy invoices and the control of either manual cheques or e-transfers. More and more, I am started to see a movement towards customer generated E-transfers, this is fairly simple and can even be handled without the customer having to know your bank account number; your customer can simply email you a payment and you can then log onto your banking portal and deposit the money. This method will often require you to set up an account with the Email Payment processing company such as Interac
Online Bank Payment - If your bank allows for it, you can also set your business up as a payee on an online payment platform. This would require you contact your financial institution, to set your business up as an online bill payment payee.
Whichever payment method(s) you opt to set your business up with, recurring billing businesses need to pay close attention to their bank accounts. All payment processing methods, even the simple cheque, offer avenues for client recourse. There is also the concern of late and even delinquent payments. While it is important to maintain a friendly relationship with your client, so they do not become offended and switch to another provider, you also need to protect you bottom line and business viability. After all, a customer who chronically does not pay their bills can rapidly become a liability. While it is rare, it may become necessary for a business to fire a client. One must, however, handle such a situation with care as a happy client may tell one friend, and unhappy client will tell everyone they know. This is also why those businesses who rely on a large and growing stream of recurring sales clients, do their utmost to maintain a high level of service. After all, one unhappy client may result in many clients leaving.