A Payment Recovery system is not something that most business owners think about.
We talk to CEO’s and business owners every single day and most of them admit to thinking about the front end of their business, that is sales/marketing, far more than they consider the back end, follow-up and customer retention.
This is understandable especially if your business is a start-up. Operating the front-end of the business is far more exciting. Getting new customers, taking new ground, increasing market share is fun. The back-end of the business feels reactionary, it feels more like tedious administrative follow-up. Guess what? It is! But as your business accumulates more customers you will at some point need to develop a customer retention plan, and more specifically a payment recovery system sooner than later. Here’s why.
There is a lot of money to be made on the back-end of your business. The misconception that most business owners have is that closing the back door of their business won’t really add much money to their bottom line. But almost every business we talk to has a 5-figure number that they are losing to payment failure each month! This adds up in a hurry, and can be a 6-figure number by the end of Q4.
So how do you know if you need a payment recovery system? Here are 3 indicators:
Indicator #1- You Have A Subscription Based Business
The industry average for payment failure in businesses with subscription based revenue is 10%. That means, on average, 10% of your total revenue will fail due to some sort of credit card decline. Subscription based businesses are one of the fastest growing segments in our economy today, now comprising a $300 billion industry. More and more companies are opting for this type of revenue model, and for good reason. It produces predictable income and makes the business far more appealing for investors and potential buyers. Check out this article from Inc.com to see how a subscription based model can increase your business’ value.
But subscription revenue is not without its weaknesses. The most prevalent and frustrating weakness is failed payments. If you sell subscriptions then you are very familiar with this issue. When 10% of your payments fail each month that number adds up real quick. So the first indicator that you need a payment recovery system is if your business operates a subscription based model. If so, you need to have a payment recovery system in place right away.
Indicator #2- You Have At Least $1000 Each Month That Fails
At first glance, a $1000/month of failed revenue does not seem to warrant much concern. $1000 a month is $12,000 a year. No big deal. But it’s more than that. You have to calculate the customer’s lifetime value. So you if you have 10 customers who pay a $100 each month for a subscription and their payment fails in month 1. Then you get your $1000/month in failed revenue. If that happens again in month 2 with 10 different customers then your $1000/month looks like it not changing, but in month 2 you really have $2,000 of lost revenue. Because the 10 that failed last month are still not paying in month 2. And on and on it goes. This number will just compound and get larger and larger unless you put a system in place. $1,000 a month in failed payments is a great indicator that you need to put a payment recovery system in place before your business accrues a significant amount of lost revenue.
Indicator #3- You Lack Clarity
If someone were to ask you, “how much money did you lose in the last 30 days to credit card declines?” Could you give an accurate answer? If not, don’t worry, you’re in good company. But you need to know how much money is walking out the back door of your business. Recurly, Stunning, Churn Buster, and Infusionsoft are all great software platforms that will help you to get more visibility on your failed payments.
Gravy Can Help
Of course if all this sounds like a lot of work, it is. Check out this blog post, we break down exactly what you need to implement an effective payment recovery system. But the good news is you don’t have to go at this alone. We can do this for you. We’ve created a company that solves this problem for business owners and CEO’s all over the U.S. We have spent the last 6 years developing proven strategies and systems that, on average, recover 50% of all failed revenue. Considering the fact that the best dunning software available averages 12-15% recovery, we know we’ve cracked the code of payment recovery. We can close the back door of your business and we can do it at a fraction of the cost it would be for you to do this on your own. And the best part is, we only get paid if we make you money. We work off commision, so if we are not adding money to your bottom line, our service doesn’t cost you a thing! Book a call below to see how we can help you and your business.