By: Jim Roddy, VP of Marketing at the RSPA
At a recent industry conference, I was chatting with an RSPA VAR member who was describing his years-long, incremental transition to the recurring revenue business model. A third executive was listening in and interjected with this question: “Isn’t there a way you can transition instantly? Can’t you just one day say that everything you do going forward will be on a recurring revenue basis?”
The VAR and I both shook our heads and said no. We didn’t detail all the factors as to why, but chief among them would be cash flow implications, adjusting employee compensation, and adding several new products and services to ensure your profitability – not to mention the whiplash your customers would feel as you alter contracts, change how your merchants are billed, and flip your service philosophy from reactive to proactive.
On my way home from the event, I thought to myself that while the answer I gave was accurate, I should have reframed the question to produce a more productive answer: “If VARs can’t convert instantly, what actions can they take to accelerate the transition?”
Now that’s something worth pondering. Here are five tactics I’ve seen leading retail IT VARs implement that turbo-charged their transition to the as-a-Service business model.
- Assign a Recurring Revenue PDR
At your office, you probably don’t want PDAs (Public Displays of Affection) but you definitely need a PDR (Person Directly Responsible) to move key initiatives forward. Recurring revenue can’t just be something your team talks about before everyone goes back to their normal busy day job. Assign one individual in your organization as the point person responsible for speedy progress building your recurring revenue infrastructure and income stream. Delegate much of this individual’s current responsibilities to other team members so he or she can embrace this task, not just work on it with their left hand when time allows. The PDR won’t personally execute every task, but they should be responsible for marshalling the necessary resources to make appropriate progress and achieve your recurring revenue goals.
- Establish Goals for Both Revenue and Actions
The solution providers who moved fastest from the dealer model to the MSP (Managed Services Provider) model made progress intentionally. They established deadlines for legwork to be completed and set monetary goals per year, per quarter, per month, and even per merchant location. At a RetailNOW 2018 breakout, RSPA reseller member Chris Rumpf of Flyght, a POS industry pacesetter in the as-a-Service transition, recommended resellers measure their average recurring revenue per location with a goal to meet or exceed $800 per location per month. His poll of his breakout attendees showed that only a handful of VARs in the room met that threshold, and many said they were guessing at that statistic because they don’t track it. Another goal I see leading VARs embrace is to aim for monthly recurring revenue to exceed monthly expenses. Once that goal is attained, the VAR is afforded financial flexibility as project work each month falls to the bottom line.
- Conduct a Regular Recurring Revenue Progress Report Meeting
Instead of spending weeks ruminating about what 157 steps you should take to fully transition your organization, you should determine your first series of actions, execute them, and then conduct a progress report meeting to analyze, adjust, and reposition. The book Dual Transformation: How to Reposition Today’s Business While Creating the Future articulates well the POS VAR’s dilemma and solution:
- Creating a new business from scratch is hard, but executives of incumbents have the dual challenge of creating new businesses while simultaneously staving off never-ending attacks on existing operations.
- It is critical to discover this path by action and not by analysis. Every idea to create new growth is partially right and partially wrong. The problem is that you don’t know which part is which.
- You are under no legal requirement to hold to your initial goals and boundaries. As the world changes and you see what works and what doesn’t work, you can and should go back and revise the rules of the game.
- Companies that successfully execute dual transformation can own the future instead of being disrupted by it.
- Transforming a company is indeed a journey, one that is both unpredictable and perpetual.
- Execute a Recurring Revenue Marketing Plan
Selling your merchants managed services shouldn’t be an oh-by-the-way proposition. You need to frequently and persistently market your managed services offering to your customers. The best time to close on the sale is during a costly IT crisis. You can say, “We can cut in half this one-time service charge if you sign our managed services agreement going forward.” Also, take time to review your merchants’ IT-related break/fix expenses over the past months and compare it to what they would pay on a managed services contract. You can also offer a 90-day trial period for managed services to current break/fix customers. As one VAR told me, “Prove to them that it works, and they tend to buy-in.”
- Acquire a Local MSP
Acquisitions by POS VARs are infrequent, but buying an established Managed Services Provider is a lightning-fast way to dive into the as-a-Service world. You immediately take possession of recurring revenue technologies, contracts, vendor agreements, and expert personnel instead of building them over time. I know of at least two resellers who have executed this, and when I’ve asked them how it’s going, they smile as if they’ve discovered a secret the rest of the channel is blind to.
I know for many POS VARs the thought of essentially sprinting through a business marathon seems impossible. However, the path has been cleared by your vendor partners and fellow resellers which enables you to make the recurring revenue transition faster if you want. Think of it this way: Back in 1855, the fastest time recorded for running one mile was 4 minutes, 28 seconds. Today the per-mile time for the world-record marathon – that’s one mile followed by 25.2 more – is 4 minutes, 38 seconds.
Maybe you haven’t moved your business fast in the past, and maybe you’ve been standing still in 2019, but if there was ever a time to achieve greater profits and predictable revenue quickly, you’re living in it.
