Blasphemy: MRR Is Not the Holy Grail

Howard M. Cohen

They’re going to burn me at the stake for this one, but I’m here to tell you — contrary to what many others have told you, monthly recurring revenue (MRR) is not the Holy Grail of IT.

Don’t get me wrong; Monthly recurring revenue is terrific. You start each month out with sales already in the books, perhaps close to the point where you reach or exceed break-even on day one. That’s awesome. But not everyone gets there as quickly as others, and your monthly costs still need to be paid.

More and more I hear people asking members of our community whether they’re in the managed services business or the project services business. Nobody ever told me the two were mutually exclusive. And, in fact, I can imagine why you’d do one without the other.

The Mobius Loop of IT Services

To maximize your revenue, consider the “mobius loop” of IT services. A mobius loop is basically illustrated as a “figure-8,” which is endless and just continues going around and around.

In this case, start with a project. You’re engaged to install an ERP system for a client. You go in and assess their current state and identify their goals in installing this new system. Then you inventory their users, client devices and the rest of their resources. You review their financial structures and prepare to automate them. Then you install the software, build the chart of accounts, add the users and migrate the data. You complete the installation, perform the training — and your client is ready to go.

What next?

The right answer is for you to sell that client a managed services agreement to assure continuous performance of that ERP and support of the users.

What next?

Next you begin to review the reports coming out of your system, monitoring to identify areas that may require improvement. Perhaps you didn’t provision sufficient storage at the unanticipatedly high rate of growth they’re exhibiting. Time to go in and propose your next project, to increase that storage capacity.

Rinse.

Repeat.

When Do You Want to Make Money?

Yes. Your first response to that question was correct. Always. You always want to make money.

Answer this same question in the context of your next cloud subscription sale. You can wait for the first monthly payment to start making money, but why wait? Wouldn’t you prefer to make money before the subscription begins? During the deployment of the subscription? After the subscription goes live? Sure you do. Yet so many MSPs satisfy themselves with just the subscription commission.

Before entering the mobius loop where projects lead to contracts, which lead to more projects and so on and so on, you should still enjoy the rewards of the most profitable possible sales before, during and after the subscription sale. Here are some examples:

Before

Before they even buy the cloud subscription, they will need your help selecting that service, figuring out which is best from competing offerings and determining how it will fit into their organization. Here’s a quick checklist of presales consulting services you should …