Companies with recurring revenue are more insulated against economic headwinds and disruption. They’re more resilient. And they have more revenue predictability to fuel long-term growth.
If technology projects slow down like some integrators are predicting (and are already seeing happen, in some cases), then what’s the plan to protect revenue, jobs, and customer satisfaction to carry your business forward?
Let’s look at the latest Subscription Economy Index report for inspiration: It analyzes growth and resilience of businesses that rely on recurring monthly revenue (RMR) models.
The report reveals that companies with strong RMR models continue to outpace the S&P 500, with 10.4% growth vs. 6%, despite the presence of economic uncertainty. For these same companies, quarterly revenue growth is holding steady, while the S&P 500 declines.
The moral of the story: Companies with recurring revenue are more insulated against economic headwinds and disruption. They’re more resilient. And they have more revenue predictability to fuel long-term growth.
Is Your Company Vulnerable without RMR?
If you’re stuck in the mud when it comes to RMR, then you’re not alone—but your company is vulnerable to uncertainty.
According to NSCA’s Financial Analysis of the Industry report, historically, most integrators’ sales have come from non-recurring sources. In 2020, however, the industry saw a healthy upswing in recurring revenue, from 10.83% of revenue coming from RMR in 2018 to 17.32% of revenue coming from RMR in 2023.
The change from 2020 to 2023, however, went in the opposite direction—back down. It dropped from 17.32% to 14.2%.
A 2024 survey led by NSCA and Commercial Integrator doesn’t tell a much better tale. According to the data, 47% of integrators report that less than 5% of their revenue is recurring.
These numbers indicate that the industry needs some help—and we’re here to give it. Try these logical and achievable steps to move your own RMR needle.
Meet with People Who Care About RMR
When selling advanced solutions with an RMR component, integrators may need to shift their focus away from security, AV, and IT teams and go straight to the financial decision-makers. These leaders will be the ones who are most interested in hearing about RMR offerings and understanding why and how their organization will benefit.
Paint a Picture of the Future with RMR
Help your customers understand what RMR will really do for them. It frees up capital and makes budgeting easier, but it will also do so much more:
Provide ongoing support, troubleshooting, and maintenance so problems are taken care of quickly
Connect them with one company to call for answers to any questions they have about their technology
Ensure that regular upgrades and enhancements are made to technology systems to improve security and usability
Give their in-house teams more time to focus on core tasks vs. system monitoring, maintenance, and management
Train Your Team to Sell Services
Selling managed services starts long before discussions about technology or price. It starts with building relationships. Is your sales team ready to develop them?
Instead of talking about products, solutions, and benefits, your sales team should be focused on helping clients generate the business outcomes they’re after. Those goals could include something like:
Increase cash flow coverage ratio (CFCR) above 1.2
Increase market share by 5%
Eliminate downtime by 50%
Increase margins by 10%
Increase win percentage by 7%
The right outcome-based sales training can help you scale your managed services practice by creating repeatable processes that your sales team can follow for every interaction along the sales journey.
Don’t Do It Alone
Trying to build out your own program by yourself can be overwhelming and lead to stalled initiatives. There are many options to choose from when it comes to partners that can expedite and simplify the process.
For example, they can help you build custom financial plans and bundle recurring contracts with product lease payments.
The ROI on RMR
Our findings indicate that successful integration firms generate at least 20% of their revenue from managed services—with 50% margin.
According to NSCA, the average sales rep at an integration firm generates $1.8 million in revenue annually with a 30% margin ($540,000).
Imagine the impact your salespeople could have if they each sell 20% of their revenue in managed services—or $400,000 in recurring revenue per person. Because they’re selling at a 50% margin, that’s an improvement of $200,000 per salesperson!
Comments