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What is a monthly recurring revenue model?
Monthly recurring revenue (MRR) is the predictable revenue that a business receives every month. It usually comes from licence or subscription based services. Unlike one-off project-based work, MRR is a stable revenue that comes in monthly for an agreed set of time. Typically, MSP contract terms last for 1 – 3 years. Looking at that from a revenue perspective, that’s potentially 3 years of predictable monthly revenue.
MRR is an important metric for measuring financial growth, especially in the Managed Service Provider (MSP) space, where it can be notoriously unpredictable.
We know from speaking to our Partners that this is especially true for those MSPs who rely predominantly on professional services and technology. That’s because revenue for this type of service, although sizable, can change drastically month-on-month.
Why is monthly recurring revenue so important?
Competitive edge
A steady stream of income is vital for a thriving business. When you have a steady stream of income, you can invest in new technologies and grow the business.
Reinvestment for MSPs is key to staying ahead of competitors.
Competition remains the top challenge for MSPs…This isn’t particularly surprising as the MSP space continues to grow and the landscape becomes more competitive.
Source: Datto – Global State of MSP Report 2022
Certainty and business valuation
MRR provides certainty.
It gives an accurate picture of how much revenue is due to come in over a long period of time. A consistent monthly revenue stream allows you to plan into the future with confidence and, ultimately increase the value of your business
Growth and churn trends
MRR provides a smooth view of revenues, making it easier to spot consistent growth trends, and identify churn. This gives sales and marketing intel into growth opportunities.
Customer value
MRR and customer value go hand in hand.
If your customer, who you’re billing every month for a key service, is happy then it is likely they’ll consider you for more services.
The age old acquisition vs retention debate would argue that it is more beneficial to retain customers. MRR, and contract terms that come with this revenue model, help with long-term retention.
How to calculate monthly recurring revenue
A simple way to calculate monthly recurring revenue is:
monthly ARPU (average revenue per user) X total number of monthly users = MRR
A simple way to increase monthly recurring revenue
Now we’ve covered what MRR is and why it is important, we can look into how to increase it.
We know that cybersecurity and cloud are the key focus for the majority of MSPs. And for good reason, reports show this is where customers need increasing support.
The difficulty there is that both of these MSP offerings require a huge amount of in-house skill to deliver.
The great thing about selling eve Voice is that it’s pretty easy compared to other services.
First of all, it’s not complicated to sell, because we’ve intentionally designed it to be that way.
Before I joined eve Networks I worked for a reseller. I’ve been there and know the frustration when services are over-complicated and a nightmare to sell to customers. Because of that experience, I make it my goal to get rid of the headache for people who are in the same position I was in.
Our licences make it simple for you and your customers to choose what works. You won’t need to spend hours or even days figuring out how the heck you sell it, it’s easy to pick up.
Everyone needs a phone system, so if it’s not you providing it, then it’ll be your competitors.
Take the calculator to see how much recurring revenue you could make
We know that selling hosted voice is probably not your number 1 priority this year.
In fact, it might not even be in your top 3.
But it might just be the difference between hitting your targets and falling short.
After all, it’s the little gains that become a lot.
Within seconds, our recurring revenue calculator will give you a breakdown of how much MRR you could be making for your business.
