How to Add $700,000 In Recurring Managed Services Revenues
At a cloud computing road show hosted by Axcient and Hewlett-Packard, Axcient CEO Justin Moore offered a simple recurring revenue reality check for VARs and MSPs. Moore conceded that many VARs are hesitant to pursue managed services. But then he offered a real-world cloud computing example that showed channel partners how to gradually build to more than $700,000 in annual recurring revenues.
According to Moore, Axcient partners that book roughly two customer deals per month — or 24 deals per year — will generate about $68,000 in first-year recurring revenues. Continue at that pace for five years, and the MSP’s annual recurring revenue figure will grow to $720,000, Moore added.
The numbers are both reassuring but intimidating. VARs often jump into the MSP market looking for fast returns and maybe even a higher company valuation — as part of an exit strategy. In stark contrast, Moore essentially told today’s audience in New York that managed services and cloud services require long-term commitment, but the dividends keep growing as long as you keep booking new monthly business (in this example, two deals per month).
Of course, Moore’s example focuses on a single solution from Axcient — cloud storage, backup, business continuity and archiving rolled into a single hybrid cloud solution. It doesn’t address all the other recurring revenue services you can offer — from the basics (monitoring and managed security) to the advanced (hosted unified communications).
Many MSPs now roll multiple managed services together for a flat per-user, per-office or per-experience monthly fee. That trend surface at last year’s Schnizzfest conference, hosted by TruMethods.
Plus, I’m not suggesting that closing two managed services or cloud services deals per month is easy. Instead, Moore offered up a healthy reality check. Succeeding in managed services isn’t an overnight event. It’s a multi-year journey where the dividends can potentially keep growing.