If you would like to keep growing your MSP business, you should consider focusing on recurring revenue. One of the most important facts that numerous entrepreneurs overlook is that the revenue coming into the company is not equal. Of course, every dollar counts. However, a predictable source of revenue is more valuable than the alternatives. In simple terms, recurring revenue is reliable and stable while other sources of profit are unpredictable at best.
In a typical recurring revenue business model, the company will charge the clients a monthly fee for the pertinent services. The enterprises that use this type of model make their services ‘sticky’ such that the customers keep paying the charges. Basically, these businesses have found different techniques to retain their existing clients for months and years. In simple terms, they have focused primarily on keeping current customers as opposed to finding new ones for each fiscal period.
There are multiple benefits of choosing a recurring revenue model for your MSP operation. Your business can grow with considerable ease because more effort can be redirected to the development of core functions. You will also have predictable revenue and expenses, which ensure efficient planning for the future. In addition, a business with repeated earnings is valued higher than the alternative which relies on new business.
If you would like to adopt the recurring revenue model for your IT support business, here are some simple guidelines to get you started:
Know Your Recurring Revenue Opportunities
If you are running an MSP business, there are recurring revenue opportunities in your organization. Simply speaking, modern IT support companies offer network management and maintenance services to commercial clients for a monthly fee. If you are still offering break-fix services, you should switch to managed services. This choice will allow you to gain a consistent stream of income by charging a subscription fee instead of a service fee. In addition, if you are selling software or hardware, you should consider providing these products as a service.
Acquire Sales Management Software
Proper management of recurring sales is crucial for long-term success. Ideally, you want to minimize the time and effort expenses in handling these repeated transactions. You should consider investing in new technology for to help you streamline the management of these sales. The best option for optimal efficiency is an integrated software solution. In general, this type of application will allow you to handle order processing, billing and manage sales within the same platform. While set-up might take some effort, you will reduce the time spent on handling transactions.
Create a Suitable Pricing Plan
The pricing model in your business can break or make your recurrent revenue strategy. Poor choices with regard to pricing can cause commercial customers to be unwilling to commit to your MSP services. In general, you can choose to charge a flat fee subscription or consider the level of usage before presenting the fee to the client. Both models are beneficial for different businesses and situation. Therefore, you can use a flat fee for some services and tiered pricing for others. The most common choice is charging the client based on the size of the company and the number of resources their network demands. You should check out the general pricing strategies used by competitors. This information can help you figure out the best options and how to get ahead.
Train Your Sales Team
When you decide to utilize the new revenue model for your business, you should make certain that your sales team is ready to handle the work. In general, you should consider training the professionals so that they will adjust their approach to match your new goals. For instance, they should learn to shift focus from simply selling a product to retaining the customers. In addition, they should prioritize the current customers without neglecting their efforts to draw in new clients.
Incorporating the recurring revenue model into your MSP business will require significant time and effort. However, you will gain numerous long-term benefits, including growth and efficient financial planning.