Building Your Recurring Revenue Business

Now you have your goals down pat, and you’ve checked the T’s and dotted the i’s, we bet you’re ready for the most exciting part of your journey as an entrepreneur -building your business. 
Written By: April Bewell

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This article is the second part of the series that talks about How to Start a Recurring Revenue Business. The first part talks about setting up your goals as preparation for creating your recurring revenue business.  Now you have your goals down pat, and you’ve checked the T’s and dotted the i’s, we bet you’re ready for the most exciting part of your journey as an entrepreneur -building your business. 

Finding a Niche

One of the most important things to decide on is your niche before you build a successful digital business. A niche is a smaller area or a specialized market where companies can differentiate themselves from the competition.

Market Research

In the first part of finding a niche, you must identify your target audience. Identifying a target market generally means finding an area you are familiar with and have a general knowledge of. While you don’t have to be an expert, it will help if you know the general area and can quickly identify subtopics within that. 

Finding a pain point in the niche is the next step in your market research. You will need to define an unmet need in your market. Most of Gravy’s successful clients have products and services that soothe a pain point in the market. From Mompreneurs to Authors, Fitness to Music, we have all kinds of businesses that tap into a specific segment. It is essential to choose a niche with anticipated growth in the next five years. Your niche knowledge should help you research and understand their needs, goals, motivations, fears, and frustrations. If you’re a fan of Lean Startups, you might want to get out of the building and ask your audience while developing your minimum viable product or MVP. It’s an essential step to get critical customer feedback early on and test your assumptions about your niche. Once you do this, you can decide on your first product or service.

Finally, you will need to create your business plan. Your business plan should be as detailed as possible, detailing the product or service you provide and the pain point it will meet. Describe your ideal customer. Get to know them intimately and make sure you understand their needs. From here on, you can calibrate your business idea to show the information you have gathered about your market. The business plan is a live document that you need to update occasionally. 

As part of your market research, you can begin testing your niche and create an effective marketing plan. Create a focused marketing effort that is aligned with what you learned for your research. Get the message out to the tribe that is interested in your niche. 

For more information on types of revenue models, you can check our article on Top Ten Niche And Revenue Models To Consider For Your Course.

Choosing Your Tech

Technology is perhaps one of the most significant aspects of your digital business. This is understandable since your business processes would mostly be done on the cloud. From hosting to payments, how you eventually decide on which solution to get will dictate your future. It can very well spell the difference between success and failure. Every small glitch can lead to loss of revenue as well as trust in your business. 

It can be challenging to choose one as the vendor landscape has become so crowded with almost everything you can wish for, with “end-to-end” features. In recent years, the development of tools and platforms has skyrocketed because of the demand for all kinds of features and functionalities. 

Know what solutions you are looking for

What do you need for your business? Do you need hosting? CRM? Payment Solutions? All of the above? Be prepared to deep-dive here and research all that you can about the different providers. Sometimes it will be confusing, and at one point, it will all look the same, But be on the lookout for additional features and focus. Some vendors have either B2B or B2C specialization. Some focus on a pure marketing solution, while some are more on the side of payments and pricing. For example, traditional payment gateways like Stripe or Paypal support subscriptions, while CRMs have better back-office capabilities. 

Platform Vs. Your Website

There are so many options when choosing the right technology or platform for your recurring revenue business. You can either choose a dedicated platform like Kajabi, a course platform like Teachable, Thinkific, and Podia, or a plug-in for your existing WordPress site. You should research the pros and cons of each platform or plug-in before you commit. 

Kajabi is popular among membership site owners, subscription, and course creators. You can run your whole membership site and host your online courses on the Kajabi platform. If you want everything in one place for your membership site launch, Kajabi might be the platform for you. Kajabi integrates with different tools, like Wistia (for video) and Stripe (to accept payments).

If you already have a successful WordPress site, and you would like to add a membership site, the Wishlist membership plug-in is one of the most popular plug-ins today. You only pay one fee and can protect your pages with different passwords and usernames. You can also integrate the Wishlist membership site plug-in with varying payment processes so that you can collect your monthly fees.

There are also other WordPress plugins like Learning Management System (LMS), so you can host courses on your website.

If you are just starting and have no prior experience in the technology behind recurring revenue businesses, it is a good idea to sit down and figure these out. It will also not be too much to enroll in courses (that’s not odd to enroll in a course to figure out how to do your course, we promise!). This will cut short your research time so you can concentrate on choosing the right solutions that are an ideal fit for your business. 

Some systems also have overlap and interdependence, such that businesses like yours cannot separate them as a stand-alone solution. The best technology should be able to play nice with each other. When you figure out your tech, you will also need to figure out which is the most important one and build your operational processes around them. 

Build a system that supports flexibility

Your business should be able to handle change. Therefore, your chosen partner should be able to, as well. As early as the first adopter, you have to think of your business being in constant flux. While being flexible enough to support the customer no matter what level they are in their customer journey, it must also allow the launch of new products, incorporate new marketing campaigns, and have a wide range of self-service options. It’s an important consideration to choose one that grows with your business from the first sign up, up to the cancelations and even recovery. The best technology partner should be built for scaling and allow you to be as small or as big as you can be without limiting your growth. 

Prepare your skillset 

As your business grows, so do your requirements. Different systems and tools will be required to serve your customers better. And regardless of how many tools, applications, and platforms you integrate into your business, getting it all together requires a unique perspective of being open to new ideas. Learning will be a continuous process.  

Pricing your Product

Finally, we’ve come to another vital piece of your recurring revenue business. Evaluating the price of your product is a decision that will affect every aspect of your business. How much are you going to charge for your product?  

It would be straightforward just to price your product or your course in range with your competitors. Some overprice their products, while some haphazardly slap $29 for a course that is worth twice as much. If you price it too high, people may not buy. If you price it too low, you’re leaving money on the table. Some entrepreneurs “focus too much on covering costs or getting a specific margin, but ignore the wider pricing strategy.”

Furthermore, your pricing directly impacts almost every aspect of your business – from the marketing to the type of students you attract, to how much support and attention you can provide to your students.

You ask, then, how exactly do you price your product with the maximum profit that is still attractive to your customers? Unfortunately, there’s no magical way to get to the best price without looking at four metrics. 

To price your products well, you must learn to determine the real value of the subscription to the subscriber. Your price should be placed depending on the value that it brings to the table. They’re paying for the results that your course promises them. Think about how much your students value those results and what they’d be willing to pay to get that result.


Here’s a simple but practical way to compute if you’re pricing your product or service correctly. 

Metrics to Consider

Here are the four metrics that you must take into account when pricing your subscription box:

             Marketing expenses $3,600 /  New customers sign up 250 = CAC of $14.40.

            January 2018 - 500 subscriptions January 2019 - 225 subscriptions left (45%)

            Churn rate is 55%.

            Customer Lifetime Value = 12 (mo) / by average customer churn rate that month (0.55) = 21.81 

             From this example, your customer lifetime value (in months) for 2018 in 21.81 months (or at least until October 2020).

            $10 (cost of subscription) /$25 (your pricing) = $15 

            $15 gross profit /$25 total price =60% (gross margin)

So, at $40 per month per subscription with a gross margin of 80% (taking into account your additional costs), you’d approximate a customer lifetime value of $697.92.

[$40 Monthly product cost] x [0.8 gross margin] x [21.81 customer lifetime (in months)] = [$697.92 customer lifetime value].

Working out this figure will help you understand how much you should pay for customer acquisition and how much you should budget for marketing. It’s also recommended that you include your customer acquisition costs to cover your full marketing budget.

As a rule of thumb, your customer acquisition cost should be ideally about 25-35% of your customer lifetime value.

Take Your Time to Price Your Product

There’s so much to consider when pricing your product or service for maximum revenue. You need to study (or project) the hard numbers as well as take into account softer elements, like pricing psychology, for a more comprehensive pricing strategy.

Your main job is to ensure that you’re exceeding your subscribers’ expectations while making the most profit. Given that the market continues to grow, you have the advantage of gathering information from your competitors. See where you can better your product or service without negatively affecting your bottom line.

Over time, you may also test different price points. Start with your ideal price and increase (or decrease) it gradually till you hit the sweet spot.


Building your digital business can be a roller coaster. You might feel like you’re diving in tabs and tabs of information without an end in sight. From finding a niche, choosing your tech, to pricing your product, these are all crucial steps that can make or break your digital business. Do everything with care and let your tech do the heavy lifting. Even with all the work entailed, be comforted that soon, you will be enjoying the fruit of your labors. 

Did you enjoy this article? Our next topic for this series is all about marketing your recurring revenue business. See you then!


This article is part of a series of articles for entrepreneurs wanting to start a recurring revenue business. Check the links below to check the series!

  1. How To Start Your Recurring Revenue Business
  2. Building Your Website and Pricing Your Product
  3. Marketing Techniques For A Gravylicious Brand
  4. Selecting The Best Payment Processor

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