3 Primary Business Models and Key Differences Between Each

In this post, I will show you the 3 primary models for building recurring revenue in an online knowledge business, including the critical success factors that you absolutely must get right for long-term success.

Now if you miss any one of these three factors are almost guaranteed to struggle in your business

I will also share the specific models that you can use to build a highly profitable, low-stress, enjoyable online business that gets massive results for your clients and produces a stable, reliable Monthly Recurring Revenue stream for you.

Oh and if you hang around to the very end I will share the 1 Thing, if you get right, will guarantee your online business success and unlock the key to building recurring revenue.

Now creating monthly recurring revenue streams is one of the biggest gifts you can give yourself and your business.

And while there are plenty of ways that you can do this in a physical product business or as a SAAS business through subscriptions today I am going to focus entirely on the online knowledge niche.

So if you are a coach, consultant, expert or you have a repeatable process that people can use to get a desirable result then this post is for you.

Now before I get into the critical success factors, I first want to talk about the 3 primary business models that you can use to start building recurring revenue and some of the key differences between each

You see no matter what type of business you have today, I believe you can add on some to these elements to supplement your existing revenue or build an online knowledge business with low overheads, predictable revenue, and most importantly provides you with the time, money and lifestyle freedom that you want.

And I believe the best method to do this is with a membership. Now memberships can take many different forms but loosely speaking I group them into three categories:

Now before I dive into the 3 models you might be asking yourself what is a membership.

For me, a membership is a support system that assists people to make lasting change in any area of business or life and helps them progress from where ever they are today to their ultimate desired state.

Now how does this differ from an online course? Well, an online course delivers a defined body of knowledge over a defined time period. The vast majority of courses have 5-7 modules delivered over a similar number of weeks.

Now I am a huge fan of courses and I think they form an essential part of a modern online business but knowledge only gets people so far.

In my experience what really gets people results is the support and guidance around the implementation of the knowledge over time.

This is why even within the course model people are seeing far better results with a cohort coaching-based approach.

So let’s look at the 3 different models

A Front End membership is one that you promote directly. This may be a standalone membership or it could be the starting or entry point to bring a perfect-fit client into your world with the intent of elevating them to higher-level memberships, courses, or even products and services.

A front-end membership doesn’t always have to be a pathway to somewhere. It could be a standalone membership but I really do feel you are leaving money on the table if you don’t have a logical next step for people to take.

But more on that later in this post.

Recurring Revenue Model 2 is a back-end membership.

This is a membership that has a pre-requisite. In other words, something that people need to have completed before getting into the membership.

Now the pre-requisite could be a course. In my mind courses and memberships form the perfect partnership. You deliver the knowledge during the course and then help people form the habits and implement the knowledge through membership.

But the pre-requisite doesn’t have to be an online course. It could be for clients who have purchased products or services and to help them further you support them through your membership

Recurring Revenue Model 3 could be a small group coaching program or a mastermind.

The big distinction between this level and the previous two is the level of access members have to you, the exclusivity of the relationship, and the time you spend with them.

Whereas a membership may have 1-4 deliverables per month as in calls or content released and is accessed by all your members a small group coaching model tends to be more intimate where you have 50-60 people per coach.

A mastermind on the other hand is where you meet with a small group of no more than 50 people 3-4 times a year normally for 2 days per meeting

Now obviously the higher the contact and level of access the higher the price.

There really are no rules around these but from my experience most front-end membership range from $27 to – $97 dollars.

Back-end memberships can range from $47-$497 dollars per month

Small group coaching packages from $197 – $997 per month

And Masterminds are normally $997 and up averaging out at around the $2,000 per month mark but some are multiples of this

My advice to you is to start out with something small and manageable from a delivery perspective and once you have found your grove then you can build over time and release new levels

Success Factor 1: Growth – Attracting New Members

OK so now that we know the different models, lets look at the 3 Critical Success Factors for a Recurring Revenue Model

These are:

1. Growth – Attracting New Members
2. Retention – Keeping Existing Members
3. Revenue Maximisation – Increasing Existing Member Spend

So first up let’s look at growth or attracting new members

The number one way that you can attract new members to your membership is through a Product Launch.

Now, this model was developed by my friend and mentor Jeff Walker and the chances are even if you are not familiar with the name Product Launch you have been through the process at some stage.

The basis of a launch is that you create huge volumes of anticipation, excitement, and desire through the release of highly valuable, free but very intentionally structured content in advance of making an offer for your membership.

And having delivered just under 60 of my own Product Launches and helped countless others with theirs trust me, this process works.

There are 3 phases to the launch

• The awareness phase
• The pre-launch phase
• The offer, or open cart phase

When I’m coaching or working on the delivery of a client launch I like kicking the launch off with a two to three-week awareness phase.

During the awareness phase, you are not talking about your membership. The awareness is of the problem you solve and the results that your members have gotten or how they have overcome these problems.

In fact, I would go as far as saying that you shouldn’t speak about your membership or your upcoming offer at all but instead you should share the success stories of your members.

The most important thing is that the success stories are positioned in such a way that they demonstrate the key problems that you help people solve and what is possible for people once these problems have been solved.

It’s important to start increasing your email frequency during this phase to at least 2 emails a week to start building visibility.

This is also a perfect time to up your live stream frequency and social presence so that when it comes time for your Pre-launch phase you have warmed up your audience.

Now if you have ever taken part in a 3 part online Masterclass or Workshop the chances are that you have experienced a launch.

And that is exactly what we deliver in the Pre-Launch phase.

During Pre-Launch we offer people the opportunity to register for a free online workshop. This can be 3/4 individual training sessions or you can combine the core principles into one single session.

In the first session, we are going to share the opportunity. That is, what is possible for people if there were to implement your methodology. People need to understand why they should pay attention and what is in it if they were to follow your process.

In the second session, you position the transformation. And this is how their lives would change if they got the results that you are offering. In this section, you go deep delivering huge value, demonstrating your ability to get people results, and sharing some key components of your overall approach

In the third part of the workshop or masterclass, you are going to really hone in on ownership. Now, this is not necessarily ownership of your membership but individual ownership of one’s own situation.

In other words, you want to demonstrate to your audience that no matter what is going on in their life they have the ability to get the results that you promise.

One of the key ways that you do this is through case studies and success stories. People love seeing people like them getting results and it helps instill a sense of belief that your process works and most importantly that it can work for them.

At the very end of this third part, you can foreshadow the fact that you will be giving people who are interested in continuing their journey and going deeper with their learning an opportunity to join your membership in the coming days

This then brings us to the offer, or open cart phase.

Throughout Pre-launch you haven’t mentioned the fact that you are going to make an offer until the very last section of the final module, you are entirely focused on delivering value and creating an exceptional experience for people.

But this changes in the offer phase. Directly after the final module, you open cart, preferably with a video sales letter and supporting email.

The open cart period can last for anywhere from 3 days for a quick launch to a more standard 5 day or long 6-day open cart.

The key for the open cart is to have a single focus. Every communication drives people to your offer page.

You should email every day of open cart and each email focuses on a key element of your offer

The transformation

Your process for helping people achieve the transformation

The results others have achieved in your membership

Your bonuses

Your guarantee

Frequently Asked Questions

When it comes to Open Cart having a defined deadline and sticking to it is one element that will possibly drive the most sales. Having a deadline forces people to get off the fence and make a decision.

And it is not uncommon to see 30 – 60% of your total sales come on on the final day of Open cart

Success Factor 2: Retention – Keeping Existing Members

Ok so that covers the first Critical Success Factor for building a Recurring Revenue Model in your business and that is Growth or Attracting new members.

The second critical success factor is Retention

Now, this model I am sharing from another friend and mentor Stu McLaren that is the Success Path.

One of the keys to keeping your members is having a defined path for them to follow towards the ultimate transformation which they want to achieve.

You see when someone has a path to follow they can see where they are starting from and most importantly they can see the progress that they make over time

Having a defined success path clearly describes the 3-to 7 levels that someone will go through from joining your membership to achieving that ultimate transformation.

Your success path should describe the characteristics of a person at each level and it should also give them the milestones they need to hit to attain that level and the actions they should be taking in your membership to help them hit their milestones.

For an example of stage characteristics are as follows:

Stage 1 They are just starting out, they have identified their niche they understand the current pain points of their perfect-fit clients and they are working on their lead magnet and their opt-in page

Stage 2 could be someone who has set up Facebook Business Manager and their Ad Account and has launched their first ads. They are learning how to optimize their ads and their landing page. They are working toward their first 1,000 leads

Stage 3 they have a steady flow of leads. Are comfortable managing and scaling their ad campaigns they have launched a Mini-Front End product and getting their first upsell from opt-in.

Stage 4 Sales from their Mini-Front end product are covering the cost of their paid advertising and lead generation activities and they have launched additional upsells and revenue maximizers.

Stage 5 They have a reliable and stable funnel that is generating perfect-fit clients at scale and have now started working on a second funnel

Once we have the characteristic we can then develop milestones for each stage and link them to specific actions and activities in our membership.

This clarity and visibility around the ultimate goal you help people achieve, the path they need to take, and most importantly, the milestones that help them measure their progress, will keep your members engaged, excited, and coming back for more which will dive your retention rates through the roof

Success Factor 3: Revenue Maximization – Increasing Existing Members’ Spend

The third Critical Success Factor for building a Recurring Revenue Model in your business is Revenue Maximisation or Increasing Existing Member Spend

And this is where my Value Ascension Roadmap comes in. Now you can find a more detailed description of my Value Ascension Roadmap here, but for now, know that your Value Ascension Roadmap is the journey that a Perfect-Fit Client takes through your business.

You need to make sure that you always have the next step for your Perfect-Fit Client to take.

For every group of paying client, you will have 20% who will be willing to pay you 5 times more if the right offer was placed in front of them

Your Value Ascension Roadmap gives the 20% of people who want to spend more money, in exchange for even greater results of course, the opportunity to do so.

Now if you look at how I laid out the 3 Categories of Recurring Revenue Models that you can apply, they were laid out in an ascending manner.

That is the lowest cost, lowest interaction, and lowest levels of access first. This could be a front-end membership or indeed your front-end course.

Then we had your backend memberships which provide an even deeper level of transformation for your perfect-fit client all the way to your small group coaching programs and eventually to your high-end mastermind.

By lining up each level in your business as the logical next step for someone once they have gotten the result they desire on their existing level you are making it easy for them to ascend through your business and in doing so paying you more money and maximizing your revenue all while getting them massive results.

Unlock the Key to Recurring Revenue Stream

So we looked at the 3 primary models for building recurring revenue. Front-end memberships, back-end memberships, and group coaching and masterminds.

We then looked at the 3 Critical success factors for building Recurring Revenue

• Growth – Attracting New Members
• Retention – Keeping Existing Members
• Revenue Maximisation – Increasing Existing Member Spend

And I shared the key models to maximize your results for each of the critical success factors.

So what is this one thing that will guarantee your online business success and unlock the key to building recurring revenue?

You see there is a major issue in the online business world. There is an impression that anyone can start an online business and I don’t agree with that.

Now I don’t for a second believe that you need to have a major qualification or need to be a recognized thought leader to have a successful online business.

In fact, some of the people who have the biggest impact in the online world have no qualifications and were initially looked down on by their profession or by the big gurus

So how did their businesses grow and what do you need to do to make your business a success.

Well, it is all about the results that you can help people achieve.

If you have a proven process that works

A proven process that gets people the results that they want

It isn’t about if you will be successful it is just about when

So the starting point in all of this no matter what kind of course, membership group coaching or mastermind you want to launch focus first on building a repeatable process that will ensure people can get the result that you promise

So now that you know how to start building recurring revenue you are probably going to want to take a deeper dive into Generating leads for your online business.