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.
Hi Joe,
Spot-on – we have seen with our RMM customers and are already seeing with our cloud monitoring business, Monitis, that realistic initial expectations and tenacity in pursuing the strategy are both characteristic of the companies that we have seen growing consistently and turning into much larger companies over the course of 2-3 years.
It’s easy to lose faith if the results don’t seem that exciting at first but they are definitely there to be had and the people who really invest the time to understand the opportunity and craft their proposition around it are the ones that will thrive and prosper.
Regards,
Alistair.
Alistair,
The recurring revenue discussion is somewhat similar to 401K retirement plans here in the US. We’d all freak out if we only looked at our “one month” savings. But keep working at it every month, then compound the results, and the numbers grow exponentially.
Patience. Persistence. Time.
-jp
Joe,
I like the refreshing yet simple approach to growth. Set realistic goals and track them. Also many companies like ScienceLogic are ready and willing to assist and help VARs and MSPs where possible by adopting a sell thru model for our platform and therefore helping to keep the monthly cost to deliver the service as low as possible.
cheers
Chris
Chris,
You indirectly raise a key point: There better be some healthy margin in those recurring revenues … otherwise the five-year journey was pointless.
-jp