Unlock Recurring Revenue to Keep Customers Coming Back

Shawna: Good morning, everyone. Welcome to today's webinar coming to you live from the Evosus headquarters with LOU Software. My name is Shawna, and joining me today is Susan Dolnick. Susan, you just got married; your last name is now McPhie from SilkBalance, welcome, Susan.

Susan: Thanks for having us today. We're really excited for the conversation, and thanks for the shout-out on my recent nuptials.

Shawna: Yes, you're welcome. Congratulations! 

I am so excited to chat today, Susan. You and I go way back into previous careers that I've had, and you've been so instrumental in helping build a recurring revenue program. Now, in my position with LOU,  SilkBalance just seems like a really seamless fit to have this conversation all about recurring revenue and how to drive that. So, I'm excited to chat with you today, and we're going to kind of get into the nitty-gritty of it all. 
Before we get started, just a quick housekeeping callout for all of you on the line: if you look down below on your screen, there's a little box that says Q&A. If you have any questions, please type your questions into that box. Susan and SilkBalance have been so kind to offer us a free gift for all of you that participate and ask questions in today's conversation. At the end, we will send Susan all of the information, all of your contact emails, and she'll reach out to you guys to send you a free gift of SilkBalance. So please, ask questions. There is no bad question; we're here to answer them all, whether relevant to LOU or  SilkBalance or something completely unrelated. So again, that button is just down at the bottom; it says Q&A. After the live demo portion of today's conversation, we'll open it up and answer all of those questions. 
So, that is all I have. With that, I'd love to just kind of get started and kick things off. Susan, would you mind? You've been in the industry for a really, really long time, and you've spoken to a lot of different hot tub and pool dealers. Can you just walk us through, in your mind, what is recurring revenue? What does it mean to you, and how do people utilize it?

Susan: Yeah, absolutely. I think that's a really great place to start. 
Recurring revenue refers to a consistent stream of income that we generate from ongoing purchases or subscriptions by our customers over time. This can include subscription-based or loyalty-based services, consumable products, or maintenance and service plans that we offer at a hot tub store or a pool store to our customers. 
It's critical to have a plan to manage recurring purchases from customers because it ensures engagement, loyalty, and revenue generation. By understanding your customers' needs and preferences, any business can tailor their offerings, anticipate the demand of their customers, and foster long-term relationships. 
Recurring revenue adds significant value to a business by providing a steady and predictable stream of income. The stability can enhance your financial projections, increase the value of the company, and improve investor confidence. Moreover, it definitely fosters customer loyalty and retention, as customers are more likely to stick with a brand that consistently delivers over time in a loyalty or subscription-based program that is simple. 
So while big-ticket items may result in one-time sales, like the sale of a hot tub or the sale of a pool, a product like  SilkBalance, which is consumable and something that people use over and over again for ongoing maintenance of their hot tub, represents a recurring revenue opportunity throughout the entire lifecycle of the customer's ownership of a hot tub, which typically can span 10 to 15 years. This consistent demand for consumers ensures sustainable revenue for any business. So offering a product like  SilkBalance can serve as a key driver for attracting customers to your store. Once a customer is engaged with your brand for one product, they're more likely to explore and purchase other offerings, and this boosts the sales across your entire product offering range.

Shawna: Yeah, gosh, there's so much to unpack there. That was so well said. 
I think, if I can just kind of put it in cliff notes, what I understand you're saying is it just increases your ongoing revenue from a singular customer or client, right? They purchase one big-ticket item from you, and then you continue that relationship, and you continue gaining revenue from that customer for the span of 10 to 15 years in the life of that big-ticket purchase, who wouldn't want that, right? That just seems like a no-brainer to me. 
And a lot of what you said is a no-brainer: retaining loyalty, keeping customers engaged, keeping them in clean water, making the usability of the product much simpler, fulfilling the promises in which you committed to on that big-ticket sale. So, I mean, to me, it's obvious, it's like, well, duh, of course, we would just create a home delivery or an auto-ship or a subscription service, and we would be done with it, and we wouldn't even be having this conversation because everybody would do it. 
So, Susan, we both have talked to a lot of dealers across the country and across the nation, actually. From your perspective, what holds people back? Like, why don't they just launch a home delivery program or an auto-ship program? Like, what is holding them back from just jumping into that program?

Susan: Yeah, there are a couple of things. 
I mean, just to expand on what you were saying, I think that being in the hot tub and pool industry, we're really lucky and privileged to be in an industry where if you sell that big-ticket item to that customer, they should be your customer, and you should be making money off of them for the next 10 to 15 years. So, for example, if you're at a clothing store and someone's coming in to buy a sweater, you're not going to be making any additional money as a result of the sale of that sweater. But when it comes to hot tubs and pools, they have to have chemicals, they have to have filters, they have to have maintenance, consumable products that they purchase over the complete lifecycle. 
So, I think the number one thing that holds people back is a simple and effective management system of taking care of that recurring revenue stream. For people, repeat purchases and long-term profitability can seem like a difficult thing to do if they're struggling with inventory management, delivery, or reaching out to their customers. You know, that's something that's really the biggest challenge that we see. Stores will struggle to implement a recurring revenue stream if they don't have the proper software management and support to help them through that. If they're doing that manually, you know, you don't ever want to forget to run your customers' credit cards through every month if they're on a four-month bottle of  SilkBalance, to send it out. But if you have an automated system that supports you, and your inventory management as well, without an adequate system for inventory management, tracking your inventory levels of consumable products like  SilkBalance can become difficult and prone to errors. We find a lot in our industry that we have seasonal staff that come through all the time, so they may not be familiar with some of the manual processes that are in place. But if there's an automated software program that's in place, it's a lot easier to onboard somebody when you've got a really effective system that you've been using for a while. So, I think that ultimately, you end up possibly having a lack of inventory, you could have overstocking, you're missing sales opportunities, and you're impacting the revenue and the customer satisfaction. So, I think that those are the really big challenges when it comes to implementing an effective subscription loyalty or auto-ship kind of program. 
The other thing that we find that is a really big challenge is the billing and subscription services. When those are manually done, those are really time-consuming and they can also be error-prone. So, without robust software systems, we find that businesses really struggle to track their customer subscriptions, their billing cycles, the payment process effectively, and that leads to revenue leakage and customer dissatisfaction.

Shawna: Right, which is the opposite of what we're trying to achieve here. 
I mean, the reality is, we're trying to increase revenue, we're trying to increase profitability, we're trying to put more money towards our bottom line. And if we don't have the right software, the right programs, or whatever that may be (today we're talking about having the right software, obviously), but if we don't have those things in place, we're costing ourselves more money because employees' salaries are not inexpensive, benefits are not inexpensive, and so needing to hire more warehouse people and more admin people to charge cards and people to check the inventory manually, and then of course, there's always going to be human error because people get busy and things fall through the cracks, and that can't be avoided when we're talking about humans and people being responsible for everything. So, I think that's such a good call. 
I think back to my time in the industry, and I think the reason we were so successful with having a super robust auto-ship program, I mean shipping out thousands and thousands of products per month over the course of years, I mean it wasn't just like a one-year commitment, these people, once they were committed to a home delivery program, they stuck with it. There was no reason for them to cancel or go elsewhere because it was just so convenient. And I think the reason we were so successful with that is because we had a software, we had an all-in-one program that just made it really user-friendly and usable. 
So, I think with that, I would love to kind of jump into a live demo. We have somebody who's going to kind of control the controls, and I will walk through what we're seeing on the demo. 
Does that sound good to you, Susan?

Susan: Yeah. That sounds great, I'm really looking forward to seeing LOU in action 

Shawna: Cool, let's do it. 
So, this is the LOU home screen. Some of you joining us have seen it, some have not. These are all of your tiles, and on the tile, there's one that says "recurring orders." We're going to click into that "recurring orders" button, and then we're going to create a brand new recurring order. Let's assume we just sold a big ticket item and we want to sign that person up right away. We want to sign them up before they really start using the product and just have a great experience for them. So, for this case, we're going to search for one of our customers, maybe Joe would be a good one. And then, we are going to choose the type, which is auto-ship. These are all custom fill-in fields, so in your setup, you can choose what you want to call it, if you want to call it a subscription, or home delivery, or auto-ship, whatever makes sense for your business. But here, we're talking auto-ship. We're going to create that, and then from here, we need to set it up. So, we are going to go to- let me just give you guys kind of a high-level idea of what we're seeing here. 
There's the profile section, that's going to auto-set up for us. And then, we need to go in and we need to create the recurrence. How often do we want this to ship out? Talking about  SilkBalance,  SilkBalance is typically a four-month subscription, so we could do this a couple different ways. We need to title it, what we want it to be called, we'll call this "four month." We are going to... you can do it a couple ways, so you see all the months labeled here, you can select those, you can unselect them, you can do a lot of different things. This is really popular for maybe seasonal work, if you are doing pool cleanings or you're shipping something, maybe somebody lives in a home that they're only in six months of the year and they only need that product to that home certain months, you can customize that. For the sake of this, we're going to do every four months down at the bottom and we're just going to unselect all those months there. 
There's some optional fields down below, we want to make sure you can change the start date there if you'd like to, but you have some options on how you want that setup to go. Perfect. So now that is set up, we can leave it as is, which is what we'll do in this case, we can just exit out of that box. It's going to be for the schedule task type, you can choose which task type it is, in this case it's going to be shipping or shipping to customer. Ship to customer. And then everything below is really optional. 
I really love the color coding ability in LOU, I think that's fantastic because when it shows up on your schedule, it will show up in colors and you can easily identify what you're looking at. In the scenario of the hot tub or pool world with  SilkBalance, my suggestion would be to always have these start on one day of the month, so maybe we have them start on the first Tuesday of every month, and then you just have all hands on deck, your warehouse guys are pulling the product, shipping it out, and from a sales side and a service side, you can communicate effectively to the customer when you're signing them up because you're just going to say, by the way, these process on the first Tuesday of every month, you can expect to be billed at that time and you can expect to receive your product in five to seven days after that. Really simple. 
And then, one of the most important parts here, we need to add the SKU, what are we selling, what are we shipping, and we're going to sell  SilkBalance. I think one of their most popular products is their 76 ounce water management product, that's kind of a staple OG, I'll call it. That's what we're going to sell today is that large bottle. And then you have some options on how you want to price this. You can have it full price, my suggestion always is to offer some sort of incentive. So, for this scenario, we'll give them 10% off because they're signing up for a recurring subscription, and we want to incentivize them to keep on that. So, we'll go ahead and create that, and then the very last thing we're going to do here is we just need to turn it on, we need to activate it, we need to start that plan. And that's it, it's really that simple. You can have it activate today, you can have it activate in the future, whenever you want, but we'll just hit activate as of today to keep things kind of flowing, and that's it. That's all we do. It's really simple, and even as I talk through all of those steps, that was probably what, maybe two, three minutes, if that, and I can ramble, I'm aware. 
So, that's it. 
What did you think of that, Susan? 
Any questions?

Susan: You know, I have to say, we've been around since 2007, and we’ve been advocating and supporting our hot tub dealers in creating these auto-ship programs. 
The one thing that has always been missing for us is that we don't have software to offer. That was the biggest challenge they always faced: how do we implement this? 
 SilkBalance, you know, we recommend to our dealers that it goes out with every single hot tub. They get a cover, they get steps, they get their chemicals, and  SilkBalance. But once that goes out, how do they know that the customer needs their next bottle? As you've experienced with  SilkBalance before, once people are on  SilkBalance, they don't go off it because it eliminates 95% of the challenges that come along with maintaining a hot tub. It takes away all the work they have to do with regular chemicals and makes it really simple for them. So, they want to use it over and over again, and our most successful dealers are the ones that have implemented a home auto-ship program. But that's really the missing piece for us: to show them how simple it can be to do that. Otherwise, you're really leaving money on the table. 
People need to use chemicals and consumable products to maintain their hot tub, and if you're selling a hot tub and you're not keeping that customer within that customer life cycle for 10 to 15 years, you're just giving away money. And this is such a simple way to manage that subscription program for the customers. I think that's what customers, as you know, in the past decade, we've seen how far we've come in the past 10 years to make things a lot more simple, but the expectation of a customer is that things are really simple for them. So, when you have their  SilkBalance showing up every four months, and you have some other things that you're selling along with it, you're continuing to build that relationship with your customer, and it's becoming really successful. 
What we found is that with an auto-ship program, if you invest in your auto-ship program at the very beginning, when that customer buys that big-ticket item from you, when they buy a hot tub, they get the  SilkBalance, that initial investment in that customer ends up growing like compound interest does over the next 10 or 15 years. So, you continue to generate that revenue. While you may make $5,000 off a hot tub that you're selling once, you still should be making $5,000 to $10,000 off your maintenance, repairs, and your  SilkBalance over that customer life cycle. So, focusing on the one big-ticket item and that big-ticket sale is only 50% of the revenue that you should be getting from the customer. And then, we often find that when you have customers on the auto-ship program, when they're ready to buy their next hot tub or when they move or when they have a neighbor who's looking for a hot tub, they're referring your company because every interaction with them has been simple. It's been really easy for them to get their products sent out to them. And we find that the customers, our hot tub dealers, that take on an auto-ship program have such increased value in the business but increased value in their customer relationships. 
So, seeing something that's so simple, and it has to be simple, we live in an automated world now. So, if we're not doing things that are automated, people are going to go and look for something that's a little bit more simple.

Shawna: So well said, so well said, and I think you say something that's so important, which is increasing the value of your business. 
And I just want to say one more thing before we get to the Q&A. I know everybody's antsy to chat about that, but we are in such an interesting era right now in the specialty retail world, specifically the hot tub and pool industry. And I think Hearth is very similar to this as well, from what I'm hearing. But everybody's talking about succession planning. It's like the hottest topic to be talked about right now, and it's because for so long, there hasn't been any. Nobody's done succession planning. All of these people that are business owners started the business when they were young. They started—you know, the hot tub industry is not very old; it's only been around for 40 some years, and the pool industry is older than that. But a lot of these are first-generation or even maybe second-generation owners, and they're trying to figure out what to do with their business. And recurring revenue builds so much value and expectancy from the business. I mean, because the reality is these owners

Susan: Oh, I think Shawna just cut off for a second, so until she comes back in, I'm just going to expand on what she was saying. 
She was talking about succession planning in businesses, and one thing that I've been talking about with other people in the industry when it comes to succession planning, whether they're looking at their family members to bring in to buy the business or whether they're looking to go to an evaluator to have the valuator do valuation on the business and then go out to look for, you know, if it's a private equity company or they're looking to sell to another store. When you're looking at the financials of a company and you are a hot tub company that sells hot tubs, what you sold last year and the year before, and you can go back all these years and look at your past sales and you can look at what your projections are. But if you have a guaranteed revenue stream that happens over and over again that pays your operational, that pays the staff, that pays your overhead, that adds tremendous value because you're not looking at your financials on a prediction of future hot tub sales which is vulnerable to market fluctuations. You're looking at, "Okay, this is the base of 500 people that I built into this revenue auto-ship program and this really strong revenue stream." So establishing your store not only as a trusted resource in your community adds tremendous value when you're looking at the financials of a company because that's guaranteed year after year. Once people are on  SilkBalance, they're on  SilkBalance for the duration of the ownership of the hot tub. But if your financials show only predictions of future possible hot tub sales, your company won't be worth as much.

Shawna: Totally, yeah, that's a risk, you know, and that's a risk that an investor would have to take, whereas solid recurring revenue growth year over year over year is a non-negotiable. You can't argue with the trends; you can't argue with the facts. So, I think that's fantastic. 
I am going to turn it over really quickly to Shannon, our panelist, to see if we have any questions and to answer those really quick.

Shannon: Yeah, so one question that we got was: “When you are looking at billing, do you have to bill each account individually, or is there a way to do it more in mass?”

Shawna: Oh, that's such a good question! 
This program wouldn't work very well if we had to do it individually, which I know some other programs do. But when you have these huge, robust auto-ship programs, you can't. And we know that because we work primarily with hot tubs, pools, and hearths right now, so we've received a lot of feedback that it just wouldn't work. So, we have built into the recurring orders module a mass invoice and pay option where you can literally just mass invoice all of those jobs, all of those shipping tasks, and take payment right there. 
It is really important that you get a card on file, which we have a customer portal to do so the customer can literally just go on and add their credit card or debit information, or even ACH which we'll talk about in a minute. But yeah, mass invoicing and payment, and it's done, and it's really fast. I mean, you can do thousands and thousands and thousands of orders in just a couple of hours if that. 
Great question. Anything else, Shannon?

Shannon: Yeah, the other question was for Susan. “When talking with business owners that do have auto-ship programs, what is their process if they aren't using software to manage it?”

Susan: Yeah, that's a really good question, and a lot of them do it manually, which is very, very time-consuming. But it's such a huge revenue generator for them that they do it. So, you know, one of them could have a whole bunch of credit cards that they have as calendar notifications to process all the credit cards today, and somebody will just sit there and process all the credit cards. 
So, to have this mass ability to do all of it at once... Some of them use different types of software programs, but what I love about LOU is that it's all-in-one. Instead of having one program that does billing, subscriptions, one program that does your CRM, and your CRM management, you know, all of that incorporated into one. But that's really what we find, is that we encourage people to get on an auto-ship program so you're not leaving any money on the table. But that has been the biggest challenge, and that's why I think the synergy between this, the conversation with our product that is so successful as a repeat revenue stream, and having the LOU software and showing it in a way that's really simple. But that's what, when we talk to business owners who don't have it, we have the support to help them, we have different forms that we've done, different templates, but it's really up to them to manually manage that. 
And I love the idea of ACH as well. I think you were saying something about ACH payments.

Shawna: Yeah, yeah, so we, I'll just spoiler alert, we have a webinar next month on May 1, where we're going to talk all about ACH and how to reduce credit card fees because that's a big deal, right? We're just in the world where people are running lean, people are running really thin, and ACH is such a game changer. So we'll talk about that. But yes, we have ACH as an option to process these.

Susan: Yeah, I was just going to say that because everybody's looking for a way to cut, like when, if you're, as a business, you're absorbing those credit card fees, that's a huge expense. It can be, you know, depending on how it is that you're doing it. If you're doing it with a system where you're putting the credit card in online on a computer and you're typing that in, then you're almost paying double the fees because you're paying it through another platform to do that. And that is a huge benefit if you can do ACH payments with customers.

Shawna: Yeah, such a big deal. That's awesome. Shannon, sorry, I know we just got excited. Are there any other questions out there?

Shannon: No, that's it for now. So you guys, be excited.

Shawna: Awesome, thanks Shannon, appreciate it. 
Well, Susan, I love chatting with you. I think our conversations are always just organic and fun, and I just love seeing you. 
Do you have anything else you'd like to add before we kind of wrap things up and say goodbye today?

Susan: You know, I just wanted to again highlight the synergy between a product like SilkBalance and the LOU software platform that hot tub and pool customers can use. I think revenue diversification is such an important thing for businesses. Relying solely on a hot tub sale or an individual pool sale leaves your business again vulnerable to market fluctuations. 
You know, we all remember what COVID was like, and COVID was very successful for our industry, so we were really grateful that we were in that industry. But if you think about all the sales, for example, all the hot tubs you sold during COVID, all those people now need to be using a product like SilkBalance. So if you had invested in an auto-ship program during COVID for all of those hot tub sales, you would have been selling SilkBalance to them for almost three years now, and you continue to build that customer base. 
So I just wanted to highlight the synergy between having an effective, reliable, and successful software program and incorporating  SilkBalance. And I wanted to also thank you so much for inviting me to come today. It was a lot of fun. It's always so fun to see you, Shawna. And I think you and I are so passionate and excited about our industry and our products. 
But at the end of the day, you know, LOU and  SilkBalance, we have the opportunity to really affect change in people's businesses through the stuff that we offer. And I love when people incorporate our suggestions because it really does make a big difference for the value of their business and helping their teams and their salespeople be successful as well.

Shawna: Yeah, such an incredible point. And again, I love chatting with you, Susan. You're such a wealth of knowledge. You are so well known and so well respected in the industry. You're a powerful woman in a male-dominated industry. It's just so cool to see what you've been able to do and, again, to your point, just how we can impact people's businesses. This isn't about software, this isn't about a water management product, this is about people growing their businesses, people growing in their local economy. I'm just so passionate about that personally. I think that in the world where it is corporate America that we live in, it's just so incredible to see people affect such big change in their families and their local economy through these specialty retailers. It's really cool. So thank you for everything you're doing. I really appreciate it. 
For the audience out there, if you have any questions, if you'd love to just chat with Susan, just have a conversation, her email is susan@silkbalance.com. And for all of you that asked questions today, she will be reaching out to you, or somebody on her team will, to get you that free gift, some samples of  SilkBalance. 
And then just as a reminder, if you'd like to chat more, learn more about ACH, we do have a webinar next month on May 1. You can go to evosus.com/lou/webinar, or you can just send us an email at sales@evosus.com, and we can answer those questions for you there as well. 
But thank you again, Susan. Thank you so much, and I hope everybody has a fantastic day and a great rest of the week. Thanks for joining.

Susan: Thanks, everyone. Thank you, Shawna.

Shawna: Bye, guys.