What is recurring revenue and why does your service business need it?

Author: Leanne Knowles

• First published: December 2020
• Article updated: August 2024
• 3-4 minute read

The hidden cost of lumpy cashflow

If you’ve been running a service business for a while, you know the drill: some months you’re flush, other months you’re staring at the bank balance wondering when the next payment will hit. This rollercoaster is exhausting, and it’s one of the biggest barriers to growth for small business owners.

Traditionally, models like monthly retainers have helped some businesses smooth things out — but let’s be real, not every service fits neatly into a retainer. And even when it does, the work can still be feast or famine depending on client churn, scope creep, or seasonal demand.

The good news? Technology and shifting buyer behaviour have opened the door to a new breed of revenue models for B2B eCommerce and service businesses. These models are built for consistency, scalability, and—most importantly—freedom.

And the star of the show? Recurring revenue.

Revenue model vs business model (and why it matters)

Before we dive deep into recurring revenue, let’s make sure we’re clear on the difference between your business model and your revenue model. They’re related, but not the same thing.

• Your business model describes how your company generates value across all key inputs — from operations, to marketing, to delivery. It’s the big-picture blueprint of how your business works.
• Your revenue model describes how you generate income from that value. It’s the engine room of your business — the part that determines whether you’ve got a steady flow of fuel (cash) or constant stalls.

Business model examples:

• Business services
• Managed services
• Value-added reseller
• Product as a service

Revenue model examples:

• Fee for service
• Hourly billing
• Project fees
• Service contracts
• Subscription revenue
• Recurring revenue

When you understand these distinctions, you can start making smarter moves to future-proof your income.

What recurring revenue really is (and what it’s not)

Recurring revenue is a systemised method of earning business income that is reliable, consistent, and regular. In today’s world, it’s easier than ever to automate, making it one of the most highly valued revenue models in the market.

But let’s clear up a common misconception: traditional repeat business is not recurring revenue.

Just because a client “usually” comes back, doesn’t mean the income is predictable. True recurring revenue is baked into the structure of the offer, the delivery, and the payment model — not left to chance.

Examples of recurring revenue for service businesses

Whether you’re in consulting, creative, professional services, or tech, there are multiple ways to integrate recurring revenue streams into your business.

Some proven options include:

• Content subscriptions — exclusive articles, videos, templates, or reports on a membership basis.
• Digital service retainers — packaged ongoing services delivered remotely.
• Software as a Service (SaaS) — either creating your own or partnering with an existing platform.
• Affiliate sales for SaaS products — commission-based revenue by promoting aligned tools.
• Evergreen online courses or memberships — with rolling enrolments or regular delivery cycles.
• Hybrid memberships with physical product delivery — e.g., monthly kits combined with exclusive training.
• Digital advertising — monetising audience attention through relevant ad placements.

Why recurring revenue changes everything

Shifting to a recurring revenue model isn’t just about making more money — it’s about making better money.

With recurring revenue you get:

• Stronger, more consistent cashflow — smoothing out the peaks and troughs.
• Increased productivity — your team can focus on high-impact work instead of chasing the next sale.
• Easier market expansion — you can enter new markets with confidence because you know your base income is secure.
• Sustainable profitability — predictable income allows for smarter investment and planning.
• More freedom as an owner — spend more time on strategy and less on firefighting.

No wonder investors and business buyers now prioritise recurring revenue as a key factor in valuation. Businesses with stable subscription or membership income command higher multiples because the income is less risky.

The real risk of ignoring recurring revenue

Without it, you’re stuck with:

• Lumpy cashflow that makes it hard to plan.
• Sales cycles that start from scratch every month.
• Stress levels that spike whenever a big client leaves.
• Less negotiating power with suppliers and partners.

And the longer you wait to diversify your income, the harder it gets to make the switch — because your calendar is already full.

How service businesses can build recurring revenue

Here’s where it gets exciting: service businesses are perfectly positioned to convert some of their existing expertise into recurring models.

You can:

1. Convert services into digital products — e.g., online training, toolkits, or resource libraries.
2. Package your knowledge into memberships — offering ongoing access to your expertise instead of one-off transactions.
3. Layer services with productised add-ons — create bundled offers that clients subscribe to.
4. Leverage automation tools — so delivery doesn’t depend entirely on your time.

Product-based businesses can also go the other way — digitising service components and combining them with products for higher-margin offers.

The formula for creating recurring revenue

While every business is different, the principles for creating recurring revenue are the same. Think of it as a 5-step formula:

1. Identify your scalable value
Look at what you deliver that can be repeated without diluting quality. This is often tied to your signature process, framework, or methodology.

2. Decide on the delivery model
Will it be fully digital, hybrid, or in-person? Will it be DIY, DWY (done-with-you), DFY (done-for-you), or Automated DFY?

3. Package it for predictability
Create clear inclusions, fixed pricing, and set delivery timelines. The goal is to make the value and the commitment crystal clear.

4. Automate where possible
Use tools for onboarding, payments, content delivery, and reporting so you’re not manually managing every step.

5. Build in retention triggers
Design your offer so customers want to stay. This could be through ongoing updates, community access, or progressive learning.

Industry-specific examples of recurring revenue

Here’s how six different sectors could apply this model:

1. Professional services (law, accounting, consulting)

• Recurring: monthly advisory retainers with access to a resource portal.
• Quick wins: online compliance checklists and templates.

2. Personal services (fitness, beauty, coaching)

• Recurring: membership programs combining online and in-person access.
• Quick wins: DIY home kits with exclusive tutorial videos.

3. Creative services (design, photography, content)

• Recurring: content subscription plans or stock libraries.
• Quick wins: template packs with licensing.

4. High tech services (biosecurity, drones, quantum computing)

• Recurring: monitoring services, software access, or support contracts.
• Quick wins: premium training modules for operators or clients.

5. Place-based businesses (hospitality, tourism, retail)

• Recurring: loyalty memberships with exclusive experiences.
• Quick wins: subscription boxes tied to local experiences.

6. Direct-to-consumer manufacturing

• Recurring: product-of-the-month clubs with exclusive designs.
• Quick wins: digital workshops teaching product care or usage.

The next step

Recurring revenue isn’t just a nice-to-have — it’s the difference between constant hustle and scalable, sustainable growth.

If you’re ready to move from unpredictable income to a model that gives you stability, freedom, and higher business value, start mapping your first recurring offer now.

Remember, you don’t need to launch all at once. Start with one well-designed stream, build your systems, and expand from there.

Your future self will thank you.

More articles about recurring revenue and other freedom models

• Small business strategies for Service eCommerce
• 5 ways to grow small business profit like a pro
• 10 ways to drive small business revenue growth and scale
• The hidden trap in your small business model (and what to do about it)
• Is your personal business mission on track?

My recurring revenue checklist

In the meantime, here’s My Recurring Revenue Checklist that I have used in my own business to help me build out my digital services strategy.  It’s yours for free and it’s an easy download, so just click on the link below and you’re on your way to the next step.

Yes! Give Me My Recurring Revenue Checklist.