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