WEBVTT NOTE This file was generated by Descript 00:00:00.870 --> 00:00:06.600 Welcome to Resilience Talk hosted by Paul Spencer of Second Nature Solutions. 00:00:07.020 --> 00:00:07.860 Let's dive in. 00:00:10.018 --> 00:00:13.048 Paul Spencer: You've committed a lot of time and a lot of money into 00:00:13.048 --> 00:00:17.608 your business whenever you started it, whether that was 10 years ago, 00:00:17.938 --> 00:00:20.788 50 years ago, or even yesterday. 00:00:21.118 --> 00:00:27.298 You've made the sacrifice and the commitment to build something, and 00:00:27.298 --> 00:00:31.588 that's what we're talking about in our ownership series is not 00:00:31.588 --> 00:00:33.898 only are you, have you invested. 00:00:34.258 --> 00:00:39.148 Time and money and maybe even pulled money from your savings, maybe even taken 00:00:39.148 --> 00:00:45.628 a pay cut and you're paying employees or you are, um, getting your services 00:00:45.628 --> 00:00:51.028 or product off the ground and you're either not getting any money or you're 00:00:51.028 --> 00:00:55.168 getting very little money as compared to if you just got a job out in the market. 00:00:55.603 --> 00:01:03.163 And so this is well known and it's part of the sacrifice, but it's also part of the 00:01:03.163 --> 00:01:06.373 fun and the reason why we own businesses. 00:01:07.153 --> 00:01:14.473 And so as an owner and as part of our ownership series, we're trying to get, 00:01:14.533 --> 00:01:22.483 uh, a new angle, a new mindset into what is the purpose of our business now. 00:01:22.483 --> 00:01:23.473 Now we all have. 00:01:23.908 --> 00:01:28.198 A mission and a vision for our business, why we started it. 00:01:28.198 --> 00:01:30.538 Sometimes it's just to make more money. 00:01:30.658 --> 00:01:34.858 Sometimes it's because, just because we think we can do it better, and sometimes 00:01:34.858 --> 00:01:40.168 it's a more holistic view of the world and we want to contribute and serve more in 00:01:40.168 --> 00:01:43.588 a better way regardless of what that is. 00:01:44.938 --> 00:01:50.578 You still have to have an understanding that you own an asset, and that's 00:01:50.578 --> 00:01:54.088 the purpose of the ownership series that we've been talking about. 00:01:54.538 --> 00:01:58.288 So today we're gonna be talking about recurring revenue, which 00:01:58.288 --> 00:02:04.048 is the fuel of the business, and we'll go into some details on that. 00:02:04.348 --> 00:02:06.148 But just to review. 00:02:06.368 --> 00:02:13.418 What are the key evaluators of, um, how do we appraise the value of your business? 00:02:13.868 --> 00:02:18.308 Uh, there are eight that I'm gonna go through, and again, as you've heard. 00:02:19.063 --> 00:02:23.833 There can be less, there can be more, there could be different ones. 00:02:23.833 --> 00:02:26.863 If you talk to different people or if you go out and you, you look 00:02:26.863 --> 00:02:29.472 on the internet, you ask chat GPT. 00:02:29.803 --> 00:02:36.493 Um, the point here is that you need to have a focus of what is my asset 00:02:36.553 --> 00:02:40.368 and how am I continually adding value? 00:02:41.098 --> 00:02:42.688 Into my asset. 00:02:43.138 --> 00:02:44.908 So we're gonna review those real quick. 00:02:45.088 --> 00:02:47.308 Financial performance, which we've talked about. 00:02:47.698 --> 00:02:53.218 Growth, potential, key dependencies, recurring revenue, which is what 00:02:53.218 --> 00:02:55.318 we're gonna talk about today, right? 00:02:55.318 --> 00:02:55.768 To win. 00:02:56.458 --> 00:03:00.328 Corporate structure, key management and leadership, and 00:03:00.328 --> 00:03:02.608 then owner, owner involvement. 00:03:03.028 --> 00:03:06.778 Um, so those are the eight that we're gonna, that we're gonna review today. 00:03:06.778 --> 00:03:10.798 We're gonna look at recurring revenue, and you could see how all these are 00:03:11.098 --> 00:03:16.108 intertwined and connected because when we talked about financial performance. 00:03:16.918 --> 00:03:17.218 Right. 00:03:17.248 --> 00:03:22.708 We were forecasting, um, being able to demonstrate historical revenue, 00:03:23.158 --> 00:03:28.618 being able to, to, uh, demonstrate predictable, consistent revenue. 00:03:28.978 --> 00:03:30.838 And what's the input to that? 00:03:31.138 --> 00:03:33.328 Well, the input to that is recurring revenue. 00:03:33.838 --> 00:03:38.908 And really from a buyer's perspective, if we're going to go buy a business, 00:03:39.298 --> 00:03:42.718 um, we're going to ask what is. 00:03:43.588 --> 00:03:45.538 Your automatic revenue every month. 00:03:45.718 --> 00:03:50.518 What's your annual recurring revenue and what proportion? 00:03:50.878 --> 00:03:51.148 Right? 00:03:51.148 --> 00:03:55.468 What percentage of your annual revenue or your monthly revenue 00:03:55.858 --> 00:03:58.498 is based on reoccurring revenue? 00:03:58.978 --> 00:04:01.048 How are you collecting this every month? 00:04:02.067 --> 00:04:03.328 How consistent is it? 00:04:03.658 --> 00:04:04.918 How reliable is it? 00:04:05.308 --> 00:04:06.808 I've been with different. 00:04:07.078 --> 00:04:11.757 Organizations where we talk about, uh, days sold outstanding, right? 00:04:11.757 --> 00:04:17.038 Which is when we send out an invoice, we have some terms and we may say net 00:04:17.038 --> 00:04:21.358 10, net 30, some of you go net 45 even. 00:04:21.597 --> 00:04:25.348 And really it depends on the type of service that you're providing, the type 00:04:25.528 --> 00:04:27.058 of clients that you're working with. 00:04:27.388 --> 00:04:30.868 But really you wanna get that as close as possible, meaning your 00:04:30.868 --> 00:04:35.308 net is as soon as we sign the, the ink is dry on the contract. 00:04:35.528 --> 00:04:36.458 Then I get paid. 00:04:36.608 --> 00:04:36.878 Right? 00:04:36.878 --> 00:04:37.838 That's the ideal. 00:04:37.958 --> 00:04:40.088 We wanna have instant cash flow. 00:04:40.358 --> 00:04:41.588 Now, is that realistic? 00:04:41.648 --> 00:04:43.748 Not always, but that's what we strive for. 00:04:43.748 --> 00:04:45.758 That's our aim, uh, anyway. 00:04:45.758 --> 00:04:50.828 As an, as an owner or as a, yeah, as an owner, but also as a buyer. 00:04:51.398 --> 00:04:53.198 We're looking at that day sold. 00:04:53.198 --> 00:04:59.348 Outstanding because that gives us a sense of the health of the fuel, which 00:04:59.348 --> 00:05:02.618 is the cash flow of your business. 00:05:02.948 --> 00:05:03.458 Um. 00:05:04.288 --> 00:05:07.708 Some of you out there that I've worked with in the past, you've 00:05:07.708 --> 00:05:09.238 had days sold outstanding. 00:05:09.238 --> 00:05:14.608 That is, um, in the two hundreds, in the high one hundreds. 00:05:14.788 --> 00:05:15.898 And what does that mean? 00:05:16.108 --> 00:05:22.828 That means that work that I did 200 days ago, I still haven't gotten paid. 00:05:23.863 --> 00:05:24.193 Right. 00:05:24.673 --> 00:05:30.163 Um, that is not, that doesn't mean that I started a project in February, 00:05:30.643 --> 00:05:35.413 finished it up in late September, and I still haven't been paid. 00:05:36.253 --> 00:05:43.813 That means I finished my work in February, sent you an invoice, and 00:05:43.813 --> 00:05:49.123 I haven't done any more work on that particular project or job or whatever 00:05:49.123 --> 00:05:51.343 that, whatever that deliverable was. 00:05:51.613 --> 00:05:52.573 I'm done with it. 00:05:52.573 --> 00:05:53.383 I've wrapped it. 00:05:53.998 --> 00:05:58.588 It's yours, whatever it is done, and I haven't, you haven't 00:05:58.588 --> 00:06:01.108 paid me for over 200 days. 00:06:01.318 --> 00:06:03.178 This is completely unrealistic. 00:06:03.418 --> 00:06:09.993 It is, uh, poor, uh, inventory management, um, revenue management. 00:06:11.068 --> 00:06:15.988 And when we're a buyer and we're looking at the health of the company, 00:06:16.228 --> 00:06:18.568 that is a big warning sign, right? 00:06:18.598 --> 00:06:23.158 If, uh, my average day sold outstanding is more than 90 days, 00:06:23.638 --> 00:06:26.488 then um, that's gonna reduce. 00:06:26.808 --> 00:06:29.388 The value of your business. 00:06:29.958 --> 00:06:32.658 All right, so when we're thinking about how do we, how do we 00:06:32.658 --> 00:06:34.488 establish reoccurring revenue? 00:06:34.698 --> 00:06:35.958 Well, we just talked about it. 00:06:36.168 --> 00:06:38.178 We have to collect, right? 00:06:38.388 --> 00:06:42.918 So our accounts receivable, our process around accounts 00:06:42.918 --> 00:06:45.348 receivable, we need to focus on it. 00:06:45.678 --> 00:06:49.698 And I know I've talked about this a million times, that it's 00:06:50.148 --> 00:06:51.618 uh, nine times outta 10 any. 00:06:53.503 --> 00:06:57.522 Business, family owned business has been around for decades. 00:06:58.063 --> 00:07:01.363 Uh, doesn't tend to focus much on the accounting side, 00:07:01.753 --> 00:07:04.147 so the, the, the bookkeeper. 00:07:05.878 --> 00:07:10.528 Uh, the accounting person that might be internal is, has, probably 00:07:10.528 --> 00:07:16.138 has the worst office or worst, uh, desk location in the building. 00:07:17.428 --> 00:07:21.358 Um, they just deal with whatever's coming their way and 00:07:21.358 --> 00:07:22.768 they do the best that they can. 00:07:23.068 --> 00:07:28.858 Um, but you typically have poor insight as an owner into the flow 00:07:28.858 --> 00:07:30.688 of what I just described, right? 00:07:30.988 --> 00:07:32.638 So we need to have a. 00:07:33.598 --> 00:07:37.948 Healthy, mature process on the accounting side, on accounts receivable. 00:07:38.548 --> 00:07:43.828 So the other things that we tend to think about, um, are gonna be more strategic and 00:07:43.828 --> 00:07:48.868 then we can implement those and be more tactile, um, when we get down into there. 00:07:48.868 --> 00:07:49.138 Right. 00:07:49.138 --> 00:07:50.188 More tactical. 00:07:50.758 --> 00:07:51.207 So. 00:07:51.853 --> 00:07:53.053 What is recurring revenue? 00:07:53.053 --> 00:07:56.082 Well, it must demonstrate continuous value, right? 00:07:56.088 --> 00:07:57.433 It needs to be sticky. 00:07:57.943 --> 00:08:04.902 If, if I'm gonna charge you $100 a month or, um, $10,000 a month or $1 00:08:04.902 --> 00:08:10.603 million a year there needs, you need to demonstrate continuous value, right? 00:08:11.023 --> 00:08:17.082 And the other thing is it needs to address the pains and needs of the customer and 00:08:17.082 --> 00:08:18.973 they, those pains and needs need to have. 00:08:19.378 --> 00:08:20.428 Be continual. 00:08:20.608 --> 00:08:23.398 It's not a, it's not a one-time medicine. 00:08:23.398 --> 00:08:27.778 I know people talk about vitamin versus medicine, vitamin versus aspirin. 00:08:28.558 --> 00:08:30.958 Uh, we're not talking about a one-time, uh. 00:08:32.533 --> 00:08:35.502 Pain solution, and then now you're good. 00:08:35.803 --> 00:08:40.482 The customer has to be continually experiencing some kind of need, 00:08:40.633 --> 00:08:44.863 and that is, um, something that would fit in the recurring revenue. 00:08:45.253 --> 00:08:49.903 Um, another thing that needs to happen on our side as an asset, as 00:08:49.903 --> 00:08:53.863 the, as our business is, as we scale. 00:08:54.388 --> 00:09:01.078 So it, uh, as we have 10, 10 customers and we get to 20, and then we get 00:09:01.078 --> 00:09:07.858 to 100 and 1000 my profit should start to increase, not decrease. 00:09:08.038 --> 00:09:14.368 If I'm losing money as I scale, then my recurring revenue model is not working. 00:09:14.992 --> 00:09:19.433 Um, another thing that we talk about when we think about sales, because 00:09:19.433 --> 00:09:24.113 recurring revenue is a function of sales, it's an input into sales. 00:09:24.473 --> 00:09:27.563 Um, and it's an output of course. 00:09:27.742 --> 00:09:32.752 Um, but it has to be easy to understand and easy to buy for the, for the, 00:09:32.963 --> 00:09:34.913 for the consum consumer, right? 00:09:34.913 --> 00:09:38.423 For the buyer, uh, whatever product and service that we're selling. 00:09:38.632 --> 00:09:42.413 And so if it's not easy for me to understand, it's very confusing. 00:09:42.893 --> 00:09:43.463 Um. 00:09:44.143 --> 00:09:47.383 Then I'm highly unlikely to buy it. 00:09:48.043 --> 00:09:55.123 Easy to buy means that, uh, once I decide that I want this, then, uh, 00:09:55.213 --> 00:09:59.533 this goes to car, car sales, which I recently bought a car, which was. 00:10:00.193 --> 00:10:01.213 Pulling teeth. 00:10:01.273 --> 00:10:02.953 It's so, so painful. 00:10:02.953 --> 00:10:04.873 It sucks so bad. 00:10:05.413 --> 00:10:07.453 Um, easy to understand. 00:10:07.453 --> 00:10:11.383 Yeah, I want this car, I want this model. 00:10:11.443 --> 00:10:13.063 I want these features. 00:10:13.213 --> 00:10:14.263 Boom, done. 00:10:14.773 --> 00:10:15.438 Easy to buy. 00:10:16.458 --> 00:10:19.723 No, no capital, right? 00:10:19.933 --> 00:10:21.913 It's six hours. 00:10:22.213 --> 00:10:27.598 Six hours sitting in the dealership. 00:10:28.288 --> 00:10:32.548 Waiting for all these things is such a pain in the butt. 00:10:32.548 --> 00:10:33.718 Is it easy to buy? 00:10:33.958 --> 00:10:34.528 No. 00:10:34.708 --> 00:10:42.058 How many times did I seriously consider walking out and saying, I'm not buying 00:10:42.058 --> 00:10:45.688 this vehicle three, maybe four times. 00:10:46.063 --> 00:10:46.363 Right. 00:10:46.782 --> 00:10:52.752 Maybe that averages out to a little more than one an hour, a little more 00:10:52.752 --> 00:10:54.463 than one every two hours, right? 00:10:54.882 --> 00:10:56.473 Uh, that's not easy to buy. 00:10:56.563 --> 00:11:00.132 So easy to buy means as soon as I sign, boom, we're done. 00:11:00.433 --> 00:11:03.613 Uh, simple contracts, simple, simple payment terms. 00:11:03.733 --> 00:11:04.272 We're done. 00:11:05.113 --> 00:11:07.843 Alright, so let's go into the continuous value side. 00:11:07.843 --> 00:11:12.583 I think it's, uh, important to be thinking about, uh, what. 00:11:13.198 --> 00:11:17.278 Involves stickiness so we can have consumables. 00:11:17.278 --> 00:11:17.638 Right? 00:11:17.848 --> 00:11:20.968 This is really helpful when we, when you're going through strategic 00:11:20.968 --> 00:11:27.898 planning and you're thinking about, um, uh, how do we get, how do we 00:11:27.898 --> 00:11:30.028 generate more recurring revenue? 00:11:30.658 --> 00:11:33.868 And sometimes you have to go outside. 00:11:34.303 --> 00:11:38.593 Of what you know, outside of what you do, outside of your own 00:11:38.593 --> 00:11:42.853 industry, to me, that that's what we call, uh, divergent thinking. 00:11:43.033 --> 00:11:47.413 Let's throw a bunch of ideas on the wall that at, at first glance, 00:11:47.413 --> 00:11:48.553 they're like, that's crazy. 00:11:48.553 --> 00:11:49.843 What does that even look like? 00:11:50.263 --> 00:11:52.273 That doesn't even make any sense. 00:11:52.663 --> 00:11:55.963 And when you get divergent thinking, then you can converge. 00:11:56.568 --> 00:12:00.648 Now you've got lots of things on there and you can take 1, 2, 3, and you're 00:12:00.648 --> 00:12:02.808 like, oh, that is very interesting. 00:12:03.137 --> 00:12:06.048 So that's what this part of this process is for. 00:12:06.078 --> 00:12:08.898 So we think about consumables, right? 00:12:09.648 --> 00:12:13.608 It's natural to have recurring revenue in consumables. 00:12:13.608 --> 00:12:15.468 What's consumables food? 00:12:16.018 --> 00:12:16.348 Right. 00:12:16.558 --> 00:12:18.478 How often do you have to buy milk? 00:12:18.658 --> 00:12:21.748 How often do you have to buy bread, eggs, right? 00:12:21.958 --> 00:12:25.798 Things that you have around your house, your favorite brands, your favorite 00:12:25.798 --> 00:12:30.448 foods, those are consumables and they're, they're recurring revenue. 00:12:31.078 --> 00:12:34.438 Um, meaning that you're gonna buy them if, if they're things 00:12:34.438 --> 00:12:37.048 that you enjoy often, right? 00:12:37.408 --> 00:12:40.918 Um, another thing is printer, right printer ink. 00:12:41.068 --> 00:12:42.148 That's a consumable. 00:12:42.418 --> 00:12:44.638 You buy the printer, the hardware. 00:12:45.388 --> 00:12:45.988 You buy. 00:12:46.228 --> 00:12:47.938 Another great example that just came off the top of my 00:12:47.938 --> 00:12:50.068 head is the, the Keurig, right? 00:12:50.278 --> 00:12:54.238 You buy coffee, you buy a coffee machine, uh, you consume. 00:12:54.238 --> 00:13:01.048 That's the, that's the thing, the hardware that you use to, to process a consumable. 00:13:01.288 --> 00:13:05.968 So you may have the, the filter, the coffee filter, you have the coffee. 00:13:06.688 --> 00:13:09.268 Beans or they're already ground, right? 00:13:09.268 --> 00:13:10.858 You might have a Keurig with a cup. 00:13:11.488 --> 00:13:15.058 Those are things that you buy the machine and then now you have to buy 00:13:15.058 --> 00:13:16.858 consumables because you're consuming. 00:13:17.742 --> 00:13:18.043 Right. 00:13:18.433 --> 00:13:24.283 Another one would be, uh, fuel gas, oil for your car, those kinds of things. 00:13:24.313 --> 00:13:28.423 Uh, windshield wipers, if we get into auto right, those are all consumable. 00:13:28.423 --> 00:13:32.113 So you can start thinking about in your business what are things that are 00:13:32.113 --> 00:13:37.752 consumable that we can start to create con uh, recurring revenue with consumption 00:13:37.752 --> 00:13:41.233 based, which is, um, utilities. 00:13:41.443 --> 00:13:41.953 So. 00:13:42.568 --> 00:13:48.328 Your electricity, your gas for your home, um, maybe even your water. 00:13:48.688 --> 00:13:53.788 Um, on the technology side, anything that's cloud-based, AWS comes to mind. 00:13:54.268 --> 00:13:59.698 Um, Azure, um, you might even pay for your, your Gmail or your. 00:14:00.043 --> 00:14:04.002 Um, office 365 or Microsoft 365. 00:14:04.423 --> 00:14:09.252 Um, those are consumptions, uh, consum, uh, consumption based, right? 00:14:09.733 --> 00:14:13.242 Uh, transactions is also a consumption based thing, which 00:14:13.242 --> 00:14:15.673 is, um, credit card fees. 00:14:16.242 --> 00:14:16.573 Um. 00:14:17.483 --> 00:14:18.622 Real estate, right? 00:14:18.622 --> 00:14:22.882 You pay 7%, 6% for your realtor to sell or buy your home. 00:14:23.272 --> 00:14:26.632 Um, there could be different brokerages, insurance brokerage, right? 00:14:26.632 --> 00:14:28.613 You pay a fee for some of those things. 00:14:29.002 --> 00:14:30.413 That's consumption based. 00:14:30.863 --> 00:14:33.923 Um, there's operational based, right? 00:14:34.163 --> 00:14:35.093 Um, meaning that. 00:14:35.863 --> 00:14:41.863 Our product or our service, uh, say a soft, like an ERP system is a 00:14:41.863 --> 00:14:47.713 software operational based system that you pay a, a reoccurring fee, right? 00:14:47.863 --> 00:14:49.183 Uh, to use that system. 00:14:49.183 --> 00:14:52.303 There's an implementation fee and then a recurring licensing fee. 00:14:52.782 --> 00:14:57.583 Um, long view service based, which is just what I just talked about. 00:14:57.583 --> 00:15:02.353 So if you buy an ERP system, you probably pay a recurring maintenance. 00:15:02.878 --> 00:15:07.828 Um, maybe there's some kinda warranty, um, may, and then there's also probably a 00:15:07.828 --> 00:15:10.498 management fee and those can be recurring. 00:15:10.858 --> 00:15:15.178 Um, you can have product driven fees, you can have subscription 00:15:15.178 --> 00:15:19.708 based fees, like for SaaS based products, which for me are, is like. 00:15:20.503 --> 00:15:27.043 A little bit insane that we have to pay, uh, $50, $300 a month for 00:15:27.043 --> 00:15:29.653 some kind of SaaS based product. 00:15:29.653 --> 00:15:33.313 I mean, you get into those RP systems and you're talking about millions of dollars 00:15:33.643 --> 00:15:36.523 every year, um, with high monthly costs. 00:15:37.003 --> 00:15:40.033 Um, uh, it's, it is what we have today. 00:15:40.063 --> 00:15:41.593 So I have opinion on that. 00:15:41.593 --> 00:15:46.273 Obviously, um, other subscription based things are just pure access based. 00:15:46.273 --> 00:15:48.373 So, uh, I think about cable. 00:15:49.393 --> 00:15:53.053 You think about your internet subscription, that's just access to a 00:15:53.053 --> 00:15:56.473 network, access to some kind of service. 00:15:56.593 --> 00:15:58.843 Um, your cell phone, right? 00:15:58.843 --> 00:16:02.173 Having a cell phone, access to cell phone, network, and internet. 00:16:02.653 --> 00:16:05.293 Um, you have d access to data. 00:16:05.593 --> 00:16:09.163 So LexiNexis comes to mind if you're legal, right? 00:16:09.163 --> 00:16:14.593 You pay for access into their cured, uh, curated, um, legal 00:16:14.593 --> 00:16:16.153 systems and information. 00:16:16.213 --> 00:16:17.473 Uh, there's lots of different. 00:16:17.963 --> 00:16:22.763 Um, access based subscriptions, uh, even content, like things that are 00:16:22.763 --> 00:16:24.233 out there on the, on the internet. 00:16:24.233 --> 00:16:28.583 Now, you may pay for a, um, a substack subscription. 00:16:28.853 --> 00:16:34.313 You may pay for a podcast, a particular podcast, um, that's access based. 00:16:34.913 --> 00:16:37.853 Um, uh, then you have value based. 00:16:38.603 --> 00:16:42.473 Another one that's very interesting is more around financial based. 00:16:42.473 --> 00:16:44.393 So, uh, you may lease. 00:16:44.998 --> 00:16:52.078 Um, a property you may lease, um, uh, like we lease, um, high end. 00:16:52.198 --> 00:16:52.828 Um. 00:16:53.698 --> 00:16:54.838 What is the word? 00:16:55.138 --> 00:16:56.188 Photocopiers. 00:16:56.188 --> 00:16:56.698 Thank you. 00:16:56.773 --> 00:16:59.548 In the, in the, like in our offices, right? 00:16:59.548 --> 00:17:05.008 Those big, super complex copiers machines, those are typically leased. 00:17:05.458 --> 00:17:09.028 Um, you may have some kind of interest over time, uh, 00:17:09.028 --> 00:17:10.407 for a product that you have. 00:17:10.588 --> 00:17:14.188 So maybe it's this a million dollars and they wanna finance 00:17:14.188 --> 00:17:16.738 it, and so they may not. 00:17:16.933 --> 00:17:20.502 You may not finance it as traditional finance, meaning through a, a 00:17:20.502 --> 00:17:24.522 loan, but you may say, alright, instead of paying a million dollars, 00:17:24.913 --> 00:17:31.122 uh, this year, we'll charge you, um, $250,000 for the first year. 00:17:31.303 --> 00:17:36.403 But we'll also add, add an interest fee, um, for the remaining seven 50. 00:17:37.003 --> 00:17:41.293 Then you pay two 50 every year for the next four years plus some 00:17:41.293 --> 00:17:43.333 type of, uh, interest, right? 00:17:43.723 --> 00:17:47.833 Uh, there's licensee licensing, which is what I described before, could be 00:17:47.833 --> 00:17:52.423 some kind of patent licensing, could be a product or some kind of IP that 00:17:52.423 --> 00:17:56.953 you have that you can give away or, uh, allow others to use it and they pay you a 00:17:56.953 --> 00:17:59.953 licensing fee and then also commissions. 00:18:00.283 --> 00:18:02.203 So anyway, all of those. 00:18:03.133 --> 00:18:09.223 One, two or three of those you could take because you're not in the consumable 00:18:09.223 --> 00:18:14.833 business, you're not in food, but maybe you have a product or a service that 00:18:14.833 --> 00:18:20.623 could be tied to a consumable and then you can get recurring revenue that way. 00:18:20.803 --> 00:18:22.273 You guys know what I'm talking about. 00:18:22.273 --> 00:18:23.143 You guys can figure it. 00:18:23.622 --> 00:18:23.892 Right. 00:18:24.433 --> 00:18:27.673 Um, and then when we're thinking about, um, easy to 00:18:27.673 --> 00:18:29.473 understand, easy to buy, right? 00:18:29.773 --> 00:18:35.412 One thing to be thinking about wi with that is that, um, when we're, 00:18:35.683 --> 00:18:41.773 when we're building something that's recurring revenue, um, and we 00:18:41.773 --> 00:18:44.803 think about, let's go to the Keurig example, that's a great example, 00:18:44.832 --> 00:18:48.612 is the machine takes a Keurig cup. 00:18:49.632 --> 00:18:52.033 Um, and if. 00:18:52.498 --> 00:18:58.468 You wanted to buy a mini filter and put some grain, right, 00:18:58.468 --> 00:19:00.118 some ground bean in there. 00:19:00.508 --> 00:19:02.698 Um, that's not gonna work, right? 00:19:02.938 --> 00:19:07.048 So what it's done is it's created a stickiness around your value 00:19:07.048 --> 00:19:11.428 for quick, uh, easily consumed coffee has a consumable, you 00:19:11.428 --> 00:19:12.718 have to keep buying the cups. 00:19:13.228 --> 00:19:18.028 Um, but now over time is, it's inconvenient for me. 00:19:18.882 --> 00:19:24.493 As the, the consumer to, uh, want to switch, right? 00:19:25.003 --> 00:19:29.023 Because now I'd have to go buy a new machine or I'd have to go buy 00:19:29.023 --> 00:19:35.832 a different, uh, uh, traditional percolator type, uh, coffee maker, right? 00:19:35.862 --> 00:19:39.072 And that's money that costs me money to go do that, right? 00:19:39.072 --> 00:19:43.602 And so now I'm kind of, I'm kind of, um, wedged in. 00:19:43.602 --> 00:19:47.053 And you don't wanna do this in a, in a, in a, um. 00:19:48.013 --> 00:19:52.153 In a, um, mean way necessarily, right? 00:19:52.303 --> 00:19:54.163 But you're trying to create stickiness. 00:19:54.312 --> 00:19:58.783 And so what you're doing is you're creating a path through with the hardware, 00:19:58.963 --> 00:20:05.503 the consumable, the end product, and you, you're putting them into your ecosystem. 00:20:05.953 --> 00:20:12.913 And as we know with large IT systems with like Epic Healthcare Hospital System, 00:20:13.123 --> 00:20:16.543 ERP systems is once you own those. 00:20:16.978 --> 00:20:21.388 Uh, it's really hard to get out of that ecosystem and switch to somebody else. 00:20:21.628 --> 00:20:24.957 So anyway, um, that's, that's some of the things that we use 00:20:24.957 --> 00:20:27.328 to get to, uh, recurring revenue. 00:20:27.598 --> 00:20:33.898 So ob these are obvious things, uh, coming up, which is these can't be one time. 00:20:34.258 --> 00:20:35.308 Value, right? 00:20:35.578 --> 00:20:39.898 You can't just say, um, you can have these in your business, but if you're looking 00:20:39.898 --> 00:20:45.268 to build recurring revenue, if your business is based on one time projects 00:20:45.478 --> 00:20:49.228 with one particular customer, and then you're done with that customer, you're 00:20:49.228 --> 00:20:54.718 done with that project, and now you gotta find another customer for another project, 00:20:55.168 --> 00:20:58.108 that is not a model that's gonna create. 00:20:58.288 --> 00:21:00.477 Lots of value for your asset, right? 00:21:00.598 --> 00:21:06.118 A buyer's not going to add a lot of value into that type of model, right? 00:21:06.538 --> 00:21:11.128 Um, and as you grow, um, with your reoccurring model, I 00:21:11.128 --> 00:21:12.118 talked about this already, is. 00:21:13.543 --> 00:21:16.842 You don't, you don't want it to be more costly, meaning I need to 00:21:16.842 --> 00:21:21.013 add more overhead, I need to have more equipment in order to scale. 00:21:21.372 --> 00:21:25.453 Um, I want it to, as, as I go, exponential with my growth. 00:21:25.662 --> 00:21:30.283 I also want my profit to also increase as, as, as that's going 00:21:30.612 --> 00:21:32.293 all around the reoccurring revenue.