Whether you’re looking at selling your firm or simply positioning yourself for long-term success, recurring revenue is a big deal right now in the AV space. We’ve discussed this in a variety of articles in the past few months, but we would today like to explore some of the challenges—as well as how technology can empower companies to overcome them.
Recap: Why Recurring Revenue Matters
As one of the top trends for 2020—and most likely among the top for 2019, 18, 17, and so forth—recurring revenue has been at the top of conversation for quite some time.
As we discussed in our recent article, recurring revenue delivers consistency, resilience, trust, and meets market demand, all while decreasing costs and helping you to focus your efforts on training and innovation. After all, the next generation of AV hires isn’t going to magically find you, it’s on you to be cool enough for their needs and be able to train the next generation.
Top Challenges for AV Firms Looking Towards a Recurring Revenue Model
But there’s no switch to flip, no easy button for suddenly making recurring revenue work. It takes active change—and change is hard. Here are just some of the ongoing challenges that come with the move to generate ongoing revenue.
Rethinking Your Culture
Changing a company culture is hard—it’s even harder when your staff has likely been doing this for decades. With much of your workforce likely in their 50s, the “you can’t teach an old dog new tricks” idea comes up. But this is natural. Imagine something as simple as driving to work the same way for 30 years. Now it’s a complete change. The same goes for a shift in operating model—except everything is changed.
Strong cultures are the root of successful digital transformation, which in short is the ability to change rapidly to handle technological evolution. If you can change fast, you can win in the AV integration space, but it all begins with culture.
Addressing a Shift in Metrics and Customer Service
What have long been the most important selling points for your business? On time delivery? Quality work? Your ability to work with a specific system?
What about things like renewal rates, churn, retention, lifetime value and average revenue per customer? What about satisfaction? Maybe some of those have been in the back of your mind, but are you ready for a business model where those are the focus?
To succeed in recurring revenue, you have to be able to answer, “what have you done for me lately?” You can lean on your experience all you want, but if you’re putting together case studies from the 90s, you might not be the top person on the Rolodex.
More than ever before, our customers have a voice and endless information — and they expect great service. This industry is often caught up in winning the next customer, but keeping the ones you have happy is critical, too. Replacing business is too expensive. Keeping what you have and adding on is the formula for growth.
A New Way of Accounting
While the change to customer acquisition and retention may be one part of the equation, how you report revenue and complete accounting for ongoing service needs to change as well. No longer is it 100% per project paid over the next 90 days, now it’s that for some, and a 30-day payment schedule for others.
Changes in the accounting process will often put a strain on your staff, who will need to understand a complete shift in allocations and the like. This is often impossible if you’re relying on manual processes to get the job done. Luckily, the way to address this is often easy—if you have the right systems in place to handle.
How M3 Technology Group Made the Shift to Acumatica and Positioned Themselves for Growth
The move to managed services requires a change in mentality, a change in training, and a change in operations—often paired with a change in technology. Cloud 9 ERP Solutions recently helped M3 Technology Group position themselves for long-term success by implementing an ERP for AV Integration Firms.
Take a look at what this Cloud 9 ERP Solutions customer in the AV industry had to say about growing their revenue with Acumatica:
"M3 Technology has grown dramatically since implementing Acumatica. With the move from the old on-premise solution to Acumatica’s Cloud ERP, M3 experienced a growth in revenues by 60% in just the first two years, all while maintaining the same headcount in the finance department. We came out of the gate billing larger orders, but we covered the tasks with the same people. We weren’t extra stressed or working overtime to keep up, yet we were doing way more in sales and transactions through Acumatica." - Kelly Burns, ERP Developer & former Chief Operating Officer, M3 Technology Group
Getting from Projects to Service: A New Way of Thinking
In order to get from working project-by-project to delivering services, you are going to have to change the way you think. In a coming blog, Cloud 9 ERP Solutions will discuss some of the challenges in getting from inconsistent streams to recurring revenue, but one area we would like to discuss today is this: A change in operating model will likely require new skills and systems to get there.
Modern software from Cloud 9 ERP Solutions, like Acumatica, is designed to handle the financial management side when you have multiple revenue streams. By balancing project management functionality with a recurring revenue model, this solution can facilitate growth while delivering insights on how to improve.
Learn more in our on-demand webinar: How to Leverage Business Software for AV Companies.
Cloud 9 ERP Solutions specializes in customizing this solution for AV/IT firms including M3 Technologies Group and more, and we would love to help you as well.