The key to turning your product into a cash machine lies in unlocking recurring revenue in a good market.
While there are several pragmatic revenue models and steps to recurring revenue in a chosen market, attaining this goal in a predictable fashion can be daunting.
At any rate, there are restrictions to the kinds of the market where startups can develop predictable recurring revenue with annual repay from customers.
For instance, cash machines are relatively easy to build in a good market rather than in a bad market.
Finding a good market to build a cash machine is important for startup survival.
The choice of market space is mostly either one of two classes:
- business to business (B2B) or
- business to consumer (B2C).
Consequently, drawing from industry experience, the better category to build a self-funded startup is the B2B market.
In B2C it is almost impossible to establish a revenue model that involves direct payment from your users. Regardless of your products' awesomeness, you'll have a good chunk of customers complaining if you decide to charge them.
For a product as awesome as Google Maps, Google experienced a massive backlash when they tried to charge for it. Today GoogleMaps is practically free and the direct revenue points have been pushed so far out that most users will never pay for it.
By Nature, most business operations accrue in financial cycles, and this presents B2B startups with great opportunities to create value and build a cash machine. Like rain, activities such as tax, invoices, project management, content development, report processing, analytics, and human resource needs are inevitable. Similarly, after-markets for already successful products are great spaces for building a business with predictable recurring revenue.
Next, it is important to compete in a big market space where you can carve a niche with an intricate product because it is easier find customers in these spaces and there’s plenty of room to pivot if your product does not fly at first. This is what Stewart Butterfield did at GameNeverending that became Flickr and later with Glitch that became Slack
A marketplace is an example of a bad market to build a cash machine because you have to attract both buyers and sellers. The marketplace startup is basically a combination of business–to–business and business–to–consumer companies. This is rather complex and is difficult to realize a cash machine from this setup.
Picking the right market is an important step to attain the reality of building a predictable acquisition of recurring revenue with annual repay.
This is the first article in the series: Unlocking the Cash Machine for your Startup.
Read the next article - Unlocking the Cash machine: Revenue Models Here