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“Recurring Revenue”​

“Recurring Revenue” are probably the sweetest two words in the channel today. Every day, smart MSPs and VARs are looking to build more Recurring Revenue (RR). It’s also fundamental for building business value.

This year, we will be focusing heavy on finding more RR solutions to bring to our IT Channel community of VARs and MSPs.

Throughout the coming months, we will be showcasing several RR solutions from around the World! At our events we already showcase many RR solutions for Backup Disaster & Recovery, Cyber Security, Remote Monitoring & Management, Manager Print, Data Centers and others. As more vendors switch to the RR model including Hardware-as-a-Service, it is conceivable that most of what channel partners will sell in the future will be on pay-as-you-go basis.

“The channel wants more RR, so we want more!”

So far this year, we have highlighted VoIP as we continue to explore the best VoIP solutions by vendors with a channel-focused business model. Check out the recent webinar that we did on the “10 reasons why the channel should be selling VoIP”. VoIP is one of those RR solutions that have been around a long time, but much has evolved in the sector. It is wise to review the current players to realign your company with the right business partner. In the webinar you will also get some good insights on the characteristics that you should look for when choosing a VoIP Vendor. We are estimating that less than 25% of the channel are proactively selling VoIP so there is a great opportunity for more to get into the VoIP game. It is truly a great “utility type” RR.

We started to ask MSPs and VARs with good RR practices to give us some insights into what they are seeing in their business. Their RR consumption models are based on a cost-per-device, cost-per-user, cost-per-service-package or cost on consumption. While everyone has some type of preference, everyone was open to all of the options so long as there was a RR outcome. Some are exploring how to offer extended hardware warranties on an added monthly fee per device, instead of the traditional lump sum fee at point of purchase (something that we have been suggesting since a few years).

It seems like getting $50 to $200 in RR per device is a good target range, depending on the mix of managed services attached to each device. Fee per user had an extreme range so no way to nail it down a reliable average price at this point. Some VARs/MSPs explained that they prefer to look at the total RR per customer. We will continue to dig in to get more numbers, but it seems like customers that generate under $2,000 per month make up the bulk of the RR business in the channel. Customers who exceed $2,000 per month in RR, seems to be where the VAR/MSP starts to get really excited.

One thing that seems clear is that the VARs and MSPs who were on a clear path to building RR are generating much greater profits. While some of these companies were under $2 million, they were pulling mid six-figures in profits. Being a highly profitable business no longer requires many multi-million dollars in sales volume. Some owners of sub $1 million dollars in sales were taking home a 6-figure salary.

We are also seeing “soon-to-be-Retiring VARs” raising eyebrows as they too see RR as a potential end-game to keep on making some money as they get into their personal “R&R” (Rest and Relaxation) years. We are actually working on a program for channel partners looking to retire within the next 5 years.

VARs/MSPs are also becoming more interested in saving hard costs and streamlining operations as they see this as a way to instantly increase their profit margins. We just introduced a local group benefits provider who can help them reduce a lot of the common business expenses like credit-card merchant rates, insurance, travel etc. Just getting better credit card merchant rates is a big deal as it can add a significant amount to the bottom line, especially when the customers are on auto-pay. Saving just 1% on credit card merchant rates on $1,000,000 in RR billings puts $10,000 into their pockets with zero effect on the transaction process. Credit card companies can also offer automatic recurring billing to end-users and allow the merchant to adjust amount as needed. This is a simple way to automate RR billing without adding another tool. As you streamline and reduce what you pay for all types of business expenses, the savings can quickly add up to big profits.

We are seeing a growing number of VARs/MSPs on the RR path, making enough profits to no longer be dependent on any one supplier. They are reaching the point where they can choose who they want work with. They are also realizing that their companies are worth a lot more. As they become less dependent on hardware and other low-margin products, they are becoming more in control of their future. Which may be the best reason of all to focus on the RR game!

Are you “all-in” in the RR Game?

If you are a vendor channel-friendly RR solutions, then lets talk how we can help you reach our channel community. If you are a VAR or MSP, keep an eye on what we are doing to help you and enjoy the RR ride!

Julian Lee