Reasons to Love Monthly Recurring Revenue

Agents and VARs are always searching for the best way to leverage existing networks to create new income streams. Monthly recurring revenue is a valuable asset in this regard because it is a stream that is foreseeable, consistent, and dependable.

In this gallery, Patrick Oborn, co-founder of master agent Telarus, runs down the types of MRR, how to expand your base, and why consistency is so critical.

Patrick Oborn is a co-founder of Telarus, Inc. and an important driver in marketing and communication efforts. “What’s next” is what Patrick does, and has done since the beginning. Patrick wouldn’t take “no” for an answer during the startup phase of the company, coming up with the idea for GeoQuote (real-time quoting), lead sharing and more.

Monthly recurring revenue is income that a company can reliably anticipate arriving every 30 days. It comes in three main categories:

• New monthly recurring revenue is earned from new customer acquisitions.
• Expansion of a current monthly customer base comes from upselling and cross-selling. Expansion revenue is derived from existing customer base versus new customer acquisitions.
• Churn is revenue lost from customers who downgrade or fail to renew their services.

There are three benefits:

Your budget process is more predictable. Monthly recurring revenue cash flow can provide a better handle on budgetary objectives than companies that conduct transactional business. You have a greater opportunity to determine what’s coming in the next few quarters.

For example, since new spending cuts preceded current spending, new customers may lag, but MRR continues monthly income from existing customers.

MRR enables you to calculate your expenses accurately relative to your revenue. For example, can you hire an employee? How much can you spend on advertising this month? What is the financial outlook for the rest of the year?

Recurring-revenue models provide a way to reach out to customers more frequently and to build brand loyalty.

Companies with recurring-revenue models can also capture and analyze data that tracks consumer trends and preferences on a much more detailed level than is possible with traditional models.

Expansion is a result of up-selling and cross-selling to your existing customer base. There are several ways to successfully do that in your business:

Listen to your customers. Understand their problems and show them you take complete ownership of any issue. Provide each customer primary and secondary solutions. In turn, the customer will likely use you as a telecom consultant in the future.

Share with customers the breadth of your company’s offerings to encourage cross-sell and more MRR. Your customers might have come aboard based on the strength of one of your solutions. They might not even realize you have other products to help solve some of their additional pinch points. Always educate customers about your full slate of offerings.

While doing so, focus on the overall value versus the net cost and help the customer identify the big picture.

Churn results in monthly revenue lost from customers that downgrade or fail to renew their services.  How can you improve the churn rate and increase customer retention?

There is no surprise as to why your customers became customers: Your products deliver an advantage that others do not.

Once this advantage falters or fails, customers will look elsewhere. Consistent delivery is paramount to MRR. Don’t be complacent. Take advantage of today’s available customer communication and feedback technology. Do not communicate with customers only when they have a problem or a great upsell is available.

… find out why.

If you do not understand why a customer canceled a service, how will you know what to improve on in order to prevent future churn?

Proactively assure customers that you are delivering the best possible solution for their “problem.” Provide hard facts that back up their decision, like CAIDA rankings, case studies and references.

Agents who work to build an MRR business model enjoy the benefits of a revenue stream that is foreseeable, consistent and dependable. This, however, is not the end of the job. It takes constant existing customer care to prevent churn and a continual commitment to expanding the greater customer base.