As far as I'm concerned, Monthly Recurring Revenue (MRR) is everything. So much so I’m going to write a short love letter to it.
I speak to a lot of MSPs and the vast majority want more MRR above anything else (tied perhaps with winning brand new clients).
Because today’s channel is built on subscriptions and MRR its sometimes easy to forget that huge levels of recurring revenue are not the norm in most businesses.
Before I started working with MSPs in 2016, I worked in lots of different sectors. Recurring revenue was highly desirable, but those other business owners didn’t know how to go and get it. MSPs don't have this issue. There are very clear and well-trodden paths to tons of MRR.
Research shows that when you have clients contracted into a monthly commitment, overall, they end up spending more with you. Maybe it’s something to do with the psychology of commitment. Or maybe it’s that the decision-makers forget they’re already giving you lots of money on a regular basis because they’re not physically paying the regular bill.
Who knows. Who cares!
MRR makes running your business so much easier. You know exactly what’s coming in. And if you have a good grip on what’s going out, you can not only accurately forecast cash flow but predict the net profit you’re going to make.
Again, it’s easy to think all businesses are like that, but they’re really not. Far too many businesses are constantly a few months away from running out of cash because they’re overly reliant on having to make sales. Could you imagine the hell of running a business like that?
Monthly Recurring Revenue is predictable, scalable, and flexible.
I actually believe MRR is as good for your clients as it is for you. It encourages you to take the relationship seriously and ensure support and service levels are as high as they can be. When you lose an MRR client, you’re not just losing a sale, you’re potentially losing the next five years’ worth of Monthly Recurring Revenue. That’s a pain point you will work hard to avoid.
There’s a lot of talk in the channel about forming partnerships with your clients. I believe MRR is a strong route to doing that. It takes normal clients and turns them into something called bonded clients. Bonded clients are the ones who stay with you for five, 10, 15 years or more. It’s simply doesn’t occur to them to go somewhere else because they are in a true partnership with you.
You can’t do that with break/fix clients.
We all love MRR. So, let’s talk about three things you should focus on, that make the biggest difference to yours. I call them the three pillars.
When you set up all three of them, they give you the ability to consistently generate more MRR from your existing clients. In fact, without all three working together, you’re just making your life overly difficult.
Here’s the first…
1. Profit matrix
I love the profit matrix, because it's old-school but it WORKS. Here’s what one looks like:
In this mockup of a profit matrix, you’ve got clients on one axis and services on the other. It doesn’t really matter which way around they are.
Where you see the dots, these signify which client is buying which service. As you can see here:
- Client number one buys support, email antivirus and encryption
- Client number two buys backup on prem, email backup, email signatures and VoIP
- Client number three buys support and cloud backup
You get the idea. You can see who is buying what.
But actually, the real power is in seeing who is not buying what.
Because you could look at client number one and say to yourself: “Interesting, they have no backup. They're not buying on prem backup, cloud backup or email backup from us. Are they relying on a hard disc in the office or buying it from someone else? I bet they’re not properly protected.”
Can you see how that creates an opportunity?
Of course, you have this information already. But it’s hidden away in your PSA. The idea of the profit matrix is to get that info out into the open, in a single summary. You can see at a glance who’s buying what and where the opportunities are.
This is why I don’t believe the profit matrix is something you do on a screen. It has less power as a spreadsheet. Instead make it physical. Put it on a whiteboard or flipchart. Stick it up where you and your team can see it.
If you must do it digitally, then display your spreadsheet on a giant TV in the office. But I promise you, the physicality of scribbling your profit matrix into existence will give it higher priority in your brain.
When it’s in front of you, your eyes will wander to it throughout the day. As you’re holding for someone on the phone, you’ll sit looking at it, and realize “hey, I need to speak to client 6 about “abc” service.”
Some of your techs will explain to clients that the reason they’re having a persistent issue is because they’re not protected by “xyz” service. Of course, your techs won’t then sell that! But if you can train them to drop you a Teams message when they realize how to make a client’s life easier, then that’s half the battle won.
The profit matrix feeds very nicely into the second pillar…
2. Strategic reviews
These are better known as Quarterly Business Reviews, or QBRs. I don’t call them that as I believe quarterly is overkill for most clients. They’re also known as technology reviews.
Doesn’t matter what you call them. Just make sure you do them.
If you want to be a true partner with your clients, you've got to take a strategic overview of their technology. The strategic review is about sitting down with them at least once a year to talk about their favorite subject, which is themselves:
- What are their plans?
- What’s coming up in the future?
- Where do they expect expansion to happen?
- What new services or products will they launch?
- What new staff do they hope to take on?
A strategic review is a look forwards, not backwards. The goal is to uncover their wants, needs and fears. Get them talking about their business and all the exciting things they’d like to do with it.
Because not only will you uncover some potential future projects and MRR services that could help them on the way, but you become part of their plans.
Their exciting future and your strategic help go hand in hand. That’s a great position to own in your clients’ hearts and minds.
Some practical things. The first time you ask a client to a strategic review you have to really sell the concept to them. Requesting someone’s time is a bigger ask than money, right?
So, make it easy on yourself by taking them out to lunch. This also gets them out of their normal environment and buys you a guaranteed hour. Find a mid-range local restaurant to take them to, not a chain. When you book ask for a table at the back, and sit them with their back to the rest of restaurant. That way they can’t be distracted by other diners.
Phones on silent by mutual agreement. No beers, this is a strategic meeting. And if you think there’s any danger you’re going to get a beating over recent problems or service issues, get them 100% resolved before the meeting and address them right at the start. You want to apologize, draw a line, and then move on to talking about the future.
Before your review have a good study of this client’s line on the profit matrix. You want to know off by heart the areas they should be investing in, so you can make sure they come up in discussion.
At the end of this strategic review summarize your actions – which may include generating a proposal – and schedule whatever the next step is.
You may even do a written summary of the meeting. There’s plenty of software that can help with this. Which leads into the third pillar of MRR…
3. Technology roadmaps
Now we’re getting into the most powerful weapon. A technology roadmap is a document that shows you and your client how their technology is going to develop over the next 2-3 years. It’s a natural output from a strategic review.
And it has a much greater power than being a simple plan. It’s laying out for your client what technology investment they are committing to in the years ahead.
Wow. We’re setting up revenue for 3 years’ time here. That will include MRR as well as projects as their business changes.
Change is an MSP’s best friend, right?
Lots of the strategic review and vCIO software around can help you generate a technology roadmap. I provide templates to members of my MSP Marketing Edge service.
Creating technology roadmaps is what true partners do. They help you plan your resources correctly, and help your clients with cashflow planning. That’s a real win-win that also cements your partnership.
Boom. There you go. Those are your three pillars of Monthly Recurring Revenue.
All you have to do is get started. Go on, get on Amazon now and order yourself a whiteboard or new flip chart. You could have your profit matrix up and running by this time tomorrow.
About the author
Paul Green is an MSP marketing expert, based in the UK, working with 700+ MSPs all over the world.
He helps MSPs improve their marketing and generate more leads with his MSP Marketing Edge program.
Paul's a former journalist and radio presenter. He's the host of the world’s most popular podcast on MSP marketing – search for “Paul Green’s MSP Marketing podcast” in your favorite podcast platform.
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