It seems that in every stage of life we’re planning for the future. Whether we’re choosing a career path, saving for a house, or investing in a career - the importance of planning is a concept we’re familiar with from an early age. When it comes to your business, the same future-focused mentality is key.
Now, more than ever is a great time to assess your business model and determine if your revenue stream is sustainable for the future. A major component to the success of businesses of all sizes is its ability to navigate future uncertain and unpredictable economies. With this in mind, we want to drive home the importance of planning and creating sustainable revenue and why you shouldn’t plan the success of your business on the traditional one-time sale most businesses are familiar with.
It’s safe to say the COVID-19 pandemic has created an unprecedented number of challenges for the technology industry, with every facet of the industry facing uncertainty. Between manufacturing disruptions, delayed installations, and a decrease in demand, the aftershocks are likely to continue through the rest of 2020. This has left many businesses scrambling to navigate a new world of restrictions and guidelines.
The biggest challenge, for some, is the lack of steady revenue, especially if they relied on project-based sales. Those who plan for the future with recurring revenue are going to find themselves in a much better position. Simply put, businesses with recurring revenue as part of their model today will come out of this situation stronger versus the ones that didn’t implement those plans prior.
At TAMCO, we’re shining a spotlight on the importance of building recurring revenue - even during non-pandemic times. The sales model integrators adhere to today is dependent upon constantly bringing in new customers - generating constant cash flow through daily new sales. However, this way of operating is very difficult and competitive because most customers will treat every solution proposal like a commodity sale. Additionally, when an integrator is fortunate enough to win a one-time sale where a customer makes a large upfront investment, they are less likely to return in a few months or years for upgrades, multi-year maintenance or monitoring services - creating a sale with no future revenue and lacking in customer loyalty. This diminishes customer lifetime value and forces integrators to remain in a constant cycle of commodity selling competition.
On the other hand, by bundling your services into a subscription-based monthly payment offering, you are upwards of seven times more likely to sell services and support at the point of sale, creating a stickier customer and future revenue. To achieve this way of selling, technology integrators have to pivot from thinking of themselves as equipment only, to a joint offering of equipment plus services. This is a multi-faceted shift that requires a mindset change in every aspect of a business.
As the industry continues to navigate a complex and difficult year, the importance of evaluating your current model and adding value to your products and services will continue to grow. Building recurring revenue takes time, but it’s an investment into the future of any sustainable business model. Then, when the next major economic downshift occurs you can breathe easier knowing you have the revenue to weather the storm.