When selling and distributing a product, Smartcool or not, you better be thinking about your revenue stream every day. As my old aerospace buddies used to say, no bucks-no Buck Rogers. And I can promise, if that isn’t cemented tightly to your eyelids, before too long it won’t be a problem.
So here are some thoughts on the basic revenue models and a summary on how to get rich.
Of the many models for generating revenue and cash, we mostly love the Fee Simple model best. This model is, as the name implies . . . simple. You do a job, you get paid. Cool, but there is a downside. To do that job, you have followed a process approximately like this:
1. Initial marketing
2. Sales contact
5. Do the work
8. Warranty & Support
So nothing bad, but bear in mind the part we like, payment, required a lot of time and effort to accomplish-all completely lost as we stride forth anew to gain a new client and payment. So simple, but not all that profitable.
Another model (for lack of a better term) is the Loyal Customer. These are great, you can bypass many of the steps and therefore bypass the time and cost. You get there by consistently building trust over time and never screwing up “Hey there, I need 5 more of these. How much?” Your answer: $6600. “OK, send them by and I’ll give you a check.”
WHAT IS NOT TO LOVE?? So a great model. But what if they don’t call? In recession times, Loyal Customers evaporate faster than cocaine in Miami. So more profitable, but requiring a steady, if minimal, investment of time and goodwill with a bit of risk.
Enter the Recurring Revenue model, or, if you prefer-the “Why the Hell is this on my credit card” Model. We all know and hate this business. Recurring revenue means a payment each and every month and any number of sketchy guys trying to get on YOUR dole. We are all victims:
1. Power bill
2. Internet service
3. Utility services
4. Phone bills
5. Credit card interest
6. That stupid software contract
Now pay attention: There is simply no better way for a company to make money (see the wildly profitable guys above). No matter what, you get a check or a credit card payment every month and mostly right on time. No phone calls, no selling, no trips to visit whiney customers or any of that stuff. That means that instead of spending time on client maintenance, you pile new paying customer on top of old paying customer month after month, making one impressively profitable pyramid. Oh yeh.
The point is that if you can offer a product that people pay for month after month, life is good. Really, really good.
And so close your eyes and imagine renting a box that prints money. Every month it spits out a stream of $5 bills and every month you pay a small rent. Good box if you can get one!
But guess what, Smartcool distributors have done this successfully with the ECO3. Financially it works like this:
- Distributor cost: $500
- Installation fee: $150
- Total: $650
- Customer Rental fee: $25 paid quarterly, $75
- Customer Install fee: $300
- Total (at installation): $375
- Balance to break even: $275 (11 months)
- Thereafter: $300 per year (46% ROI)
So let’s do the numbers: 250 units in the field (that the distributor continues to own, regardless) times $25 per month times 12 months per year is $75,000 per year.
And you probably don’t have to lift a finger for those customers ever again. That’s the first year. At the end of the second (250 more) $150,000. And the third, $225,000. Math is good, right?
And the customer? Average residential savings are $35-$65 per month depending on size of unit and how they use it. At $50 per month, the customer pockets $300 per year per unit. With no worries about warranty or maintenance costs (PS: there really aren’t any).
For sizable dual commercial units, the customer might pocket $100-120 per month and most commercial customers will have 3-10 rooftops. The math says the large retail store pockets $100 x5 units x12 months= $6,000-$1500 (your rent)= $4500 per year with no risk. That’s an instant cash flow generator, that is.
So there is the product, and there is the money. Let’s get rich.