×

RECURRING REVENUE


Todd Anthony Puma
Todd Anthony Puma

Todd Anthony Puma Owner of New York-based installation company ‘The Source Home Theater’ explains how a recurring monthly revenue business model is changing his business.

We’ve been hearing a lot about RMR (recurring monthly revenue) in recent years, and while I always understood the upside, the benefits of RMR really hit home with me a few weeks ago when I was on a job site at a client’s home with the security firm.

I started talking to the security firm owner and we went to grab a bite to eat together. While talking about the client and business in general, I asked him how important RMR is to his business. He couldn’t have been more excited about it. He gets a few dollars every month from every project he has installed. Multiply that by the hundred or so projects he does a year and the decades he has been in business and he’s getting tens of thousands of dollars a year in ‘guaranteed’ revenue.

Think of all of the benefits this gives you as a business owner:

  • RMR can carry you through the tough times. When the recession hit in 2008, many AV installers went out of business because cash dried up. Security firms like the one I describe above were able to scale back a little bit and carry through on some smaller work and thousands of dollars a month in RMR.
  • It provides some regular, steady income so cash flow is more predictable and expenses can be covered more easily.
  • It increases the value of your business, as the revenue is predictable and recurring. Investors or potential acquirers shy away from businesses that are too reliant on one person or on generating new business constantly. Showing a steady, predictable stream of revenue increases the reliability and value of the business.
Networks can be monitored through an app
Remote Monitoring.
Credit: Pakedge

So how do we integration pros work this into our business? There are several ways today, but it takes a bit of a change in how you sell and how you staff. The challenges lie in:

  • Selling the client on getting another regular monthly bill. They already have all of their bills from the satellite TV or cable company, telephone or broadband provider, electric and gas utility, etc.
  • Detailing the specifics regarding what is covered and not covered in the service contract – number and frequency of site visits, remote service calls, firmware updates and turnaround time for all services.
  • Maintaining the back office infrastructure to send bills and collect payments every month.
  • Increasing and deploying staff to provide the services that clients expect from a contracted service provider and to meet the commitments spelled out in the service agreement around service calls and response time.

Some of the key services to offer to clients to get started in recurring revenue are:

Network Monitoring: With all of the remote monitoring tools out there, it is pretty straight forward to sell a client on a package from Ihiji, Pakedge Bakpak, or Crestron’s mycrestron.com and then monitor their network while earning a monthly fee.

Service contracts: Many installers are already incorporating service contracts into their business model. Not only do these contracts provide recurring revenue, but often they result in greater client satisfaction because regular maintenance and firmware upgrades leads to less down-time and few failures in their system.

Networking: Take over a client’s network, either at work or at home (or both), and be their outsourced IT vendor. This will take a significant shift in business model, requiring more IT pros on staff, but the regular income stream and broader product offering can really help your business

Cloud based monitoring and management
Cloud based monitoring & management
offers many benefits

In the US, adoption has been slow but steady. Larger installers with the staff to handle the service calls, the back office infrastructure and the legal support to develop the agreements have been quicker to adopt a recurring revenue model.

What we have found at the The Source Home Theater is that the best policy is to take it slow and add services one at a time. Master one service with a few select customers before rolling it out broadly. Maybe offer system monitoring first. Then, rollout another service to a small group of customers and when you work out the kinks, roll it out more broadly.

We’ve found networking or IT services are the next best thing to offer. Service contracts for equipment can be the most tricky because these are the most likely to require delivery costs and to create confusion with a client on what is included and what is not.

But RMR certainly has the potential to transform your business in much the same way as it is changing ours. Take it one step at a time, and it can be the best investment your business will ever make.

Follow Todd on Twitter: @ToddAnthonyPuma