We’ve been hearing about recurring monthly revenue a lot in the past several years, and while I always understood the upside, the benefits of RMR really hit home with me a few weeks ago when I was on a job site at a client’s home with a security firm. I started talking to the security firm owner and we went to grab a bite to eat together. While talking about the client and business in general, I asked him how important RMR is to his business. He couldn’t have been more excited about it.
My client’s security firm gets a few dollars every month from every project he has installed. Multiply that by the hundred or so projects he does a year and the decades he has been in business and he’s getting tens of thousands of dollars a year in “guaranteed” revenue. It carried him through the recession and allowed him to keep more key guys on staff. It also provides some regular, steady income so his cash flow is more predictable. And if he wants to sell his business in the future, it gives him a much higher value as the revenue is predictable and recurring.
So how do we integration professionals work this into our business? There are several ways today, but it takes a bit of a change in how you sell and how you staff.
•Network Monitoring: With all of the remote monitoring tools out there, it is pretty straight forward to sell a client on a package from ihiji or Pakedge Bakpak and then monitor their network while earning a monthly fee.
•Service Contracts: Many integration pros are already incorporating service contracts into their business model. Not only do these contracts provide recurring revenue, but often they result in greater client satisfaction because regular maintenance and firmware upgrades lead to less down-time and fewer failures in their system.
•Networking: Take over a client’s network, either at work or at home (or both), and be their outsourced IT vendor. This will take a significant shift in business model, requiring more IT pros on staff, but the regular income stream and broader product offering can really help your business.
I’ve also been looking at some manufacturers and services in our market who generate recurring revenue but don’t share it with the integration pro. At the top of that list is TiVo. I just got an email from them the other day promoting their new Roamio products. It started me thinking. I used to offer TiVo to clients, but the margins were miniscule, and I was adding in another product that could require service calls (if the cable box DVR goes on the fritz, I instruct clients to call the cable provider, but I had to make a service call for any TiVo-related questions or issues). I started thinking that if TiVo offered a recurring revenue stream from its monthly $14.99 subscription fee, it would be something that would make me reconsider offering their product again. I could easily install 30-plus Tivos a year. While in the beginning the RMR would be minimal—at $2 per month per box that would be around $700 the first year—you can easily see how that can grow quickly and become a nice income stream.
Any other thoughts on RMR opportunities? Share in comments below and maybe we can all work to get manufacturers on the bandwagon.
+Todd Anthony Pumais president of The Source Home Theater Installation in New York City.