For managed service providers (MSPs), recurring revenue is the lifeblood of the business. After all, it’s what ensures a predictable and steady stream of income that MSPs can count on month after month. That’s why monitoring monthly recurring revenue (MRR) is so essential to an MSP’s growth plans.
What is MRR?
Monthly recurring revenue, or MRR, is the consistent or predictable amount of money your clients pay you each month. For example, if you provide IT support to a law firm and they pay you $3,000 a month for Remote Monitoring Management (RMM) this would be considered monthly recurring revenue. On the other hand, if a law firm contracts you to help with a one-time transition from an on-prem solution to a cloud-based solution, this would not be considered MRR as it is a one-time payment and project.
The Importance of MRR
There are a few key reasons why MRR is so important for MSPs. First, it allows MSPs to track their growth over time. By seeing how much MRR they’re bringing in each month, MSPs can gauge whether they’re on track to hit their goals.
Additionally, MRR is a great way to measure customer churn. Churn is the percentage of customers who cancel their service each month. By tracking MRR, MSPs can see how much revenue they’re losing each month due to churn and take steps to reduce it.
Finally, MRR is a valuable tool for forecasting future revenues. By looking at past trends in MRR, MSPs can get a good idea of how much revenue they can expect to bring in each month going forward. This information is essential for making sound business decisions about things like hiring additional staff or investing in new marketing initiatives.
How to Increase Your MRR Without Adding New Clients
One way to increase your MRR is by adding new clients. But what if you’re already maxed out on capacity? Or what if you’re struggling to find qualified prospects? In cases like these, your best bet may be to focus on increasing the average spend of your existing clients.
Here are a few strategies you can use to increase the monthly spend of your existing clients:
- Upsell them on higher-priced plans or add-ons.
- Offer discounts for annual prepayment.
- Create bundle packages that offer more value for the money.
- Raise your prices across the board (but be sure to communicate the value proposition to your clients).
By focusing on increasing the monthly spend of your existing clients, you can give your MRR a boost without having to acquire new clients. Just be sure to test different pricing models and strategies to find what works best for your business and your clients.
Monitoring MRR is essential for any MSP that wants to grow its business. By tracking MRR, MSPs can gauge their growth, measure customer churn, and forecast future revenues. All of which is essential for making sound business decisions and ensuring that an MSP is on track to hit its goals.