MERCURY is operating as a SaaS Model. We provide a monthly fee structure for our clients to try out our product. Therefore we focus a lot on customer service and deliver service which is above market standard.
Recurring revenue is the lifeblood of subscription companies; including us, and for good reason. First, it lowers the activation energy required for our client to try the product. Our client can try the product before committing to a multi-year license. It also ensures our client receive perpetual value from the product. If the product doesn’t hold up its end of the bargain, they can churn. Finally, recurring revenue gives the us a sense of predictable revenue and compounding growth.
This article aims to explain what recurring revenue is, some examples of different business models, and revenue metrics you (as a business) need to track.
What is recurring revenue?
Recurring revenue is revenue continuously brought in by customers who are on a subscription. Recurring revenue is not only more predictable than regular revenue, but also more stable (if you have a happy customer base).
What is the recurring revenue business model?
The recurring revenue business model is a model in which a business’s primary revenue stream is from recurring subscriptions, rather than one-off purchases. Recurring revenue businesses rely on metrics like ARR (annual recurring revenue) and MRR (monthly recurring revenue) to measure growth.
Understanding your subscription revenue
Many companies don’t take the time to comprehend what’s driving their recurring revenue, and miss a great opportunity to learn and grow through understanding their metrics and cash flow.
Having a strong foundation in your recurring revenue metrics can help you recognize where growth is or isn’t coming from. Every subscription company should be tracking metrics, including revenue, upgrades, downgrades, churn, reactivation, and total monthly recurring revenue (MRR), to understand the truth behind their monthly subscription growth and where to invest their resources.
In MERCURY, we have two parts of service fee. One is recurring license and platform revenue, which is mainly driven by clients' employee base and the business size (more resources to take). Second part is the Project Fee (one off). We decided this model to ensure our product can continue evolve and our clients share our success and growth with us.
Why the recurring revenue model is becoming so popular
For the first time in the history of business, we have a revenue model where the relationship with the customer is baked directly into how you make money.
The recurring revenue model allows you to:
Control retention and identify upsell opportunities
A recurring revenue model allows you to master customer retention, then use it to up and cross-sell. Thus, you must continually foster the customer relationship to control retention.
Identify customers on the verge of churn
Recurring revenue comes with the risk of churn, but you can take steps to reduce it. Recurring revenue gives you consistent data to examine, so you can track customer patterns and predict when someone is on the verge of churning. In MERCURY, we have 0% churn rate on active business.
Build customer loyalty
Recurring revenue means recurring customers, thus, you have to build long-term relationships. Communicate consistently with customers and provide them with stellar customer experiences to nurture their loyalty.
Importance of tracking and understanding your recurring revenue
Once you acquire a recurring revenue model, you must remain current on specific metrics in order to be aware of your company’s health.
Tracking basic recurring revenue metrics can help you:
Drive revenue
When taking a look at your metrics, you can see things, such as popular months for new customers and when to push advertising to capitalize on those time periods. Double down on acquiring segments that have high retention.
Identify high-value customers
Identify the customers who spend the most on your product, and reach out to ask what they like the most. Push those values and upsell opportunities.
See where money is being lost
Your recurring revenue may be gaining over time, but a quick look at your metrics could show you where some customers are dropping off and costing you money. Doing some cohort analysis can help in identifying which segments of customers are cancelling over time.
Stop throwing away valuable revenue, Track with our CRM/ Sales/ Subscription Module
Recurring business is not limited to software company, there also include Professional Service company like Accounting Firm, Beauty Spa, Time-Share based Hotel, Magazine Subscription/
Work with MERCURY to uncover where growth originates. We provide a Sales/ Subscription Module for you to track, organise and analyse the data. See trends from new customers, existing customers, upgrades, downgrades, and churn.
How to Collect Cash Faster?
Invoice Accurately. An accurate invoice is correct on all counts.
Who has the check? It could be the finance department, the procurement department, and the IT manager or relevant stakeholders who would need to approve your invoice.
What are exactly are they getting billed for? Are all the services and subscriptions correct, prices, changes in quantities, and refunds clearly shown in the invoice so that there isn’t any confusion?
When do they need to pay and most importantly receive the invoice? Is the invoice being sent to the customer on the correct date and with the correct due dates? The invoice needs delivery needs to predictable. We see so many cases where our clients have cash flow issues but are not able to generate an accurate invoice on the correct date based on the billing frequency.
Invoice: Delivery, Persistent, Actionable, Convenient: It’s imperative your invoice is delivered to the right stakeholders in a medium that is acceptable to them (email, mailed physical signed copies). Is the invoice persistent? Can the invoice be easily accessed by the intended audience? A self-service portal that shows their orders and invoices would allow them to access your invoice when they need it. Is the invoice actionable: Does it clearly state how to pay you and how convenient is it to pay you?
MERCURY provides a Billing Automation Solution to Generate Accurate Invoices and Collect Cash
Customer data in one system
Single Identity
Single Portal for everything: what they’ve bought from you, when they bought is from you, agreements, invoices