Recurring Value Before Recurring Revenue
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 6
- Confidence
- —
A decision rule for pricing and billing a membership. Jay Clouse's core observation is that if you create the opportunity for churn, there will be churn: offering monthly billing means some people cancel monthly simply because they can. Worse, many founders design a community around a single achievable outcome, watch members hit it and leave, then conclude something is broken, when in truth they built a course and billed it like software. The rule is to name the mechanism that makes membership worth renewing before you set the price, then choose a recurrence schedule no shorter than the time it genuinely takes to deliver the promise, so incentives and expectations are aligned on both sides.
Origin
Extracted from Deep Dive with Ali Abdaal
How to run it
- 1
Estimate honest time to first result
Work out how long it realistically takes a member to see a return on their effort. If that is three months, that number governs everything downstream.
- 2
Set the billing period no shorter than that
Do not offer a recurrence schedule misaligned with how quickly you can deliver. If a member cannot succeed inside a month, do not sell them the option to dip in and out monthly.
Pro tip Longer recurrence aligns incentives and expectations on both sides and reduces the revolving-door feel.
Watch out Annual billing amplifies any specific delivery promise you made, since you are locked into it for a full cycle.
- 3
Name the recurring value mechanism
Identify what is genuinely new and valuable each cycle. Recurring revenue requires recurring value, so if nothing renews, the model does not either.
Pro tip Ongoing facilitated sessions or workshops supply recurring value without a Netflix-style content treadmill.
- 4
Check you have not built a course
If the whole promise can be completed once, members will finish and leave. That is not churn; that is a course sold on a subscription.
Watch out Adding one course to a membership adds one-time value, not recurring value.
- 5
Price to what the market can bear
Look at who the buyer actually is and what they already pay for in this realm, for example a personal trainer at two or three hundred a month, then pick a price the market can literally support.
Pro tip Build a spreadsheet modelling members, tiers and price points across month one, month three and month twelve before committing.
- 6
If serving two price points, start high
Launch at the higher ticket, learn what works, build efficient systems, then take a slice of it to a broader audience at a lower price via tiered access.
Pro tip Tiering also lets the high-ticket product subsidise genuinely free offerings for the wider audience.
Watch out Broader markets bring more operational overhead in headcount, time and capacity, not just more revenue.
In the wild
Jay caps his membership at 200 people at a relatively high price, which is what makes a personal one-to-one onboarding call with every new member possible. Ali cross-checked this with Jordan, a lab member, who told him higher ticket at lower volume makes for a far less stressful business than low ticket at high volume, and Jay agreed, with the caveat that the stress assumption often hides an assumption that the founder personally absorbs all the capacity.
→ About $500k a year from 200 members with founder-level onboarding still viable.
Ali was weighing roughly $300 a year, which frames as less than a dollar a day to double your productivity and reaches a mass market, against roughly $1,000 a year aimed at entrepreneurs and creators. Jay's counter was that the higher figure is a large part of most people's disposable income, so the real question is whether the goal is the broadest possible service or a specific revenue number in a short period, and that a tiered approach could let him start high and widen later.
→ The pricing question reframed as a market-reach versus timeline trade-off rather than a number.
Common mistakes
Offering monthly billing by default
Creating the opportunity to churn creates churn. Some members cancel monthly purely because the option exists, before the product has had time to work.
Blaming churn on a broken community
If the design delivers one finite outcome, members leaving after achieving it is the model working as built, not a retention failure.
Assuming low ticket means low expectations
As Ali noted and Jay agreed, lower-ticket customers can carry even higher expectations than high-ticket ones, while producing far more operational load.
From the transcript
“if you create the opportunity for churn there will be churn”
“to have recurring Revenue you have to provide recurring value and so you have to think what is the mechanism that makes this worth recurring…”
“you do not want to offer a uh a recurrence schedule that is misaligned with how quickly you can actually deliver the promise”
From the episode
How To Build An Online Community - Jay Clouse
Jay Clouse