Creating Value with Monthly Recurring Revenues

Managed Services, Monthly Recurring Revenues, Partnerships, technology sales
September 12, 2016

Revenue_Generation.jpgI was lucky enough to recently be part of a great webinar on creating Proposals that Win when co-host Mike Schmidtmann said, “Money isn’t a resource, it’s a priority.”  Let that one sink in for a minute…So if I’m a technology reseller and I want Mr. Customer to purchase my solution, how can I make purchasing my solution a priority rather than waiting to see if it’s “in the budget?”

Eliminate the Sticker Shock

One way to do that is to make the”sticker shock” of investing in a new technology solution less daunting.  I recently read an article by Jackie Schmid, Director of Strategic Marketing of the Unified Communications & IT Group at GreatAmerica Financial Services, entitled “Is a Knee-Jerk Reaction Killing Your Deals?” In it, Jackie likens making a big cash outlay for technology to purchasing a new car.  We’ve all experienced sticker shock when we look at that shiny new vehicle that we MUST have.  I know from experience my husband has gone into a dealership and said, “I will only pay this much and not a penny more!”  However, when presented with a more palatable payment plan he can look at things and say, “Yeah, we can do that.”

Jackie goes on to cite a recent case study by Mitch Miller with Dynamic Computer Solutions that revealed he only gets between 20% – 25% margin on cash deals, but 35% – 50% margin on deals sold as a monthly payment. Those are incredible numbers.  Imagine getting a 50% margin AND a recurring monthly revenue stream!

Creating Stickiness

In addition to those great numbers above, you’ve now created an on-going relationship with some “stickiness” thus increasing your customer retention.  Who will that customer call when it’s time to upgrade?  Dave Isenberg, Channel Training Coordinator for the Unified Communications and IT Group of GreatAmerica, makes this point in his article, Freshening Up the Refresh.” In it he talks about rather than selling technology for cash, to offer a monthly payment; a monthly payment is the long game.  You now have that relationship that allows you to refresh your customer’s technology every 36 months – allowing your customer to have the latest and greatest – without having to go back in for the hard sell and see if the cost is in the budget.  You have made the technology a priority. As Dave writes, “When your customer makes monthly payments of $1,000 instead of paying cash for their technology you create a decision point down the road. Instead of having the budget fight when the equipment needs refreshing, you can just rip and replace the technology and go another 36 months right at or around $1,000 per month.” 

Priority vs. Resource Issue

Making your technology solution a priority rather than a monetary resource issue can be a simple shift in mindset that can pay big dividends for both the reseller and the customer.  Your customer gets to keep his technology fresh at a manageable monthly cost and you the reseller get a monthly revenue stream at higher margins that add value to your company’s net worth.

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