How To Maximize Recurring Revenue
-
Upload
affinitylive -
Category
Business
-
view
128 -
download
1
description
Transcript of How To Maximize Recurring Revenue
How to Maximize Recurring Revenue
The portion of a company’s revenue that is highly likely to continue in the future. This is revenue that is predictable, stable and can
be counted on in the future with a high degree of certainty.
Definition:
Source: Investopedia
3 Recurring Revenue Models
Charge per use or per unit of service
Fixed payment for service for a specific
period of time
Combines fixed subscription for service level with “overage”
billed as extra charges
Advantages to the Subscription Model
● Boosts sales ROI beyond a single/initial project
● Regular, predictable revenue (survivability!)
● Improves customer retention (commitment & engagement)
● Predictable costs over subscription term (can budget)
● Faster, more responsive service (no need to wait for $ approval)
● Incentive to maximize use and value from service provider
For your business For your clients
Advantages to the Usage Model
● Boosts sales ROI beyond a single/initial project
● Better customer retention (focus on delivering service, not endless quoting/negotiating)
● Increases likelihood of "rebuy" project purchase model
● Pay only for what is used & often get a better price
● Faster, more responsive service (no need to wait for $ approval)
● Reduces barriers to buy/use, especially for junior staff without approval rights or new depts.
For your business For your clients
Advantages to the Combination Model
All of the benefits of Subscription & Usage models, plus:
● Revenue that scales with use● Natural upsell opportunity to
projects for big requests/needs
All of the benefits of Subscription & Usage models, plus:
● Lower starter pricing than subs● However, need to keep an eye
on usage for overages
For your business For your clients
Examples of industries that use a combination of subscription & usage revenue models
Web Design & Development
Managed Services & IT
Marketing
Recurring Revenue Model Challenges
Client at risk of high monthly bill
Vendor at risk of unprofitable service
Risk is shared, but client bares more of the risk
Challenges to All Recurring Revenue Models
● Ongoing work is more difficult to plan, manage & assign
● Tracking time/cost is critical but difficult● Manual admin/overhead means high minimums for
subscriptions or limited discounts on usage.● Poor management, tracking & billing or a lack of
productivity can mean client dissatisfaction/churn!
Solution: Recurring Revenue Management
● Real-time tracking of usage, cost & allowances● Automation of recurring tasks & business processes● Easy approvals & invoicing based on usage● Automated billing with rollover for subscriptions
Benefits: Lower admin costs, higher revenue & the ability to stay on top of risks that can hurt the relationship.
More than models: Recurring revenue is for businesses that are centered around long-term client relationships.
The probability of selling to an existing customer is 60-70%. The probability of selling
to a new prospect is 5-20%.
Source: Marketing Metrics
It costs 6-7 times more to acquire a new customer than to retain an existing one.
Source: Bain & Company
A typical retainer process
Template tasks are auto-generated &
sent out at beginning of period
Staff complete tasks, record work
and log time in system
Budget and usage are automatically updated as staff complete work
At the end of the period, managers approve time and
work
Upon approval, invoices are generated
Client reviews invoice & fulfills
payment