Recurring monthly revenue or RMR, it’s the Holy Grail of business models. That is, it’s passionately sought and highly valued but hard to obtain.
Some do obtain it though — and that might be the most frustrating part.
Your cable company with its notoriously awful service can collect inflated monthly payments even after months when they kept you on hold for an hour before not solving your problem.
Why is recurring monthly revenue so elusive for your business? You actually care about your customers. You provide excellent service. Your proposed service offers real, quantifiable value for customers.
So what’s the problem?
You’re not alone. Many businesses built on project- or product-based revenue struggle to shift to service-based revenue.
A company’ success or failure achieving RMR often comes down to a basic understanding of the business mode.
Take This 2-Minute RMR Quiz
The AV integration market, despite its reputation for high-level, customized service, has struggled in its shift toward service-revenue. Integration firm executives know how important service revenue is for their businesses as well as the valuation of their companies. So the struggle isn’t due to lack of awareness or effort.
“They don’t want to hear about the why anymore. They get that. They’re tired of us preaching that,” said trade organization NSCA executive director Chuck Wilson when interviewed for the 2017 State of the Industry Report. “They’re saying, ‘All right. We drank the Kool-Aid. Now show us exactly how to structure the deals, how to set up the back office, how to manage these agreements.’ They’re taking it to the next level.”
Getting to that next level has been the challenge. Only 2.3 percent of integration firm earn more than a third of their revenue via service contracts, and 27 percent earn zero through service contracts, according to the 2017 State of the Industry Report.
Something is broken. We hope this quiz provides a small step toward fixing it.