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How to Plan Your RMR Roadmap

Navigating the Shift to a Recurring Revenue-Centric Business Model

RMR: Perhaps no acronym in the history of this industry has caused so much anxiety to business owners. Unlike the ever-vexing HDCP, it’s not a technical challenge; there’s no white paper to guide you through it. You know it’s where the industry is heading, but if you’re like most residential integrators, it’s still just a very small sliver of your total revenue. Luckily, though, there are a lot of ways of adding it into your business model. And once you take the leap and go all in on recurring monthly revenue, your life as a service professional will likely be much less stressful because of it.

Michael Maniscalco, VP of product at Ihiji

“First and foremost, dealers should recognize there are many different ways to find success with recurring revenue–there simply is no one-size-fits-all approach to RMR,” said Michael Maniscalco, VP of product at Ihiji. “But, one of the most important steps is to partner with experienced manufacturers who are aligned with your vision, culture, and strategies, and who will help you navigate the category effectively.”

Brian Good, VP of sales and marketing at iPoint

One way of working with manufacturers is by performing scheduled maintenance for their products. “Obtaining this information allows integrators to build packages that provide maintenance as a value-add for the customer,” said Brian Good, VP of sales and marketing at iPoint. “Breaking that cost out monthly over the maintenance period reduces the out-of-pocket expenses for the customer, allows the product to be professionally maintained, and creates a relationship that keeps the integrator in contact with the customer, informing them about new products and services creating a robust RMR stream.”

Luc Guillaume, managing director at Wisdom Audio

Similarly, Luc Guillaume, managing director at Wisdom Audio, recommended developing a robust warranty partnership with manufacturers of high-end equipment, so dealers can offer tailored, shared warranties for these products. “Even if the manufacturer offers a limited warranty, dealers can propose a partnered warranty program that extends past the initial agreement and offer to share the cost,” Guillaume said. “Advanced replacement programs are also difficult to commit to from a dealer perspective, as they require having to stock numerous items that may never leave the warehouse. Joining forces with the manufacturer to maintain that inventory makes much more sense.”

Joseph Kolchinsky, founder and CEO of OneVision Resources

Joseph Kolchinsky, founder and CEO of OneVision Resources, believes that close relationships between dealers and manufacturers can be a benefit to both parties, and is working to forge such ties with its 20/20 program. “By providing constructive feedback on things like stability, reliability, and ease-of-use, dealers can make sure their manufacturers are armed with the info they need to provide an excellent end-user experience,” he said. “This leads to a higher perceived value, lending weight to RMR offerings.”

Taft Stricklin, sales team manager at Just Add Power

Just Add Power has taken steps to provide its dealers with increased value, in an effort to help them sell service plans. For example, all of its HDIP and Ultra HDIP products allow “Image Pull” on the LAN or WAN, enabling dealers to set up a way for end users to monitor the usage of their TVs and computers. “Many dealers set up access as part of a monthly package so a residential client can see what his kids are watching on the family room TV, whether they are stuck in traffic, out of town, or in another part of the house,” said Taft Stricklin, sales team manager at Just Add Power. “There have also been instances of installers connecting the family computer so they can use it in any room of the house, while maintaining the ability to monitor kids’ computer activity.”

All About Service
As a custom integration professional (or “technologist”) in today’s world of e-commerce, the main value proposition that you offer clients is your unrivaled ability to provide expert service–and that’s something every one of them needs to pay for, to one degree or another.

Kenny Kim, director of product, OvrC, at SnapAV

“Instead of asking for it as part of the sale, a maintenance plan should be included as a default in every proposal,” said Kenny Kim, director of product, OvrC, at SnapAV. “In addition to choosing the right technology for the customer’s system, integrators must also educate on the necessity of maintenance for that system. For clients that refuse the plan, I’ve even see dealers ask them to sign a waiver explicitly stating they agree they are not getting the benefits.”

In terms of making this policy known, Kim stressed the importance of having the conversation early on. “Similar to a car, technology systems require regular maintenance and upkeep for optimal performance and a long life,” he said. “It is critical to set proper expectations up front so customers know what’s included in their maintenance plan.”

Depending on the level of need for each client, you should develop several tiers of service plans, according to iPoint’s Good. “By creating multiple plans–each containing varying amounts of non-billable hours, extended service hours, and levels of service–integrators develop customer esteem, increase value, and offer accessibility that will drive demand for the service plans. Pricing is key, as they need to remain profitable while still providing the added value to the customer.”

But how do you know how much to charge? Wisdom’s Guillaume has a strategy: “A good first step is to create a dummy client account in [your] system labeling it ‘Aftercare and Support,’ then start allocating all support cost to this ‘account,’” he said. “As months go by, the integrator will gain information on what it costs to actually support their client base. Once the aftercare and support data is evaluated, the integrator has the ability to design value-added service programs. Start pricing low, with a basic program having service calls within office hours only, and include a thorough check-up annually with a few programming updates.”

With a consensus that almost every client should be put on a service plan, the next challenge is implementing it–specifically, with clients who have become accustomed to receiving the support for free. For Kolchinsky and the team at OneVision, this is handled by offering what the company calls “Membership Plans” as a transition. “We help our partners convey to their clients that there’s a value for premium service through a process we call ‘drawing a line in the sand,’” he said. “We start by notifying their clients of a new terms-of-service agreement, which outlines premium levels of support that are only available through paid Membership Plans.

“After a transitional period, we then require all of their clients to accept, allowing us to reinforce the idea that premium support is an offer worth paying for. Keep in mind, we are not requiring their clients to buy a paid Membership Plan, only to accept the terms that dictate that paid members get access to elevated levels of support.”

Get Moving
With all the requirements of keeping up with daily business, big-picture changes like implementing service plans and RMR strategies can often be shuffled to the backburner. But Ihiji’s Maniscalco urges the importance of starting now and keeping it a priority.

“The best advice we here at Ihiji can provide is to make it a commitment within your business, and stick with it,” he said. “Set company goals and make someone accountable for getting it done. Nurture the effort, and you’ll see it pay off. I can’t tell you how many times we’ve witnessed a dealer make the commitment then quickly find success. And often, it takes much less effort than originally anticipated.”

But as you proceed, be wary of maintaining the first “R” in RMR: delivering a level of service that the client needs, which leads to contract renewals and true recurring revenue sources. “I once signed up for monthly granola delivery,” said Just Add Power’s Stricklin, as a cautionary metaphor about performing a proper cost/benefit analysis. The amount of monthly recurring autopay spending on that service added up very quickly without the Stricklin realizing it. “The key,” he said, “is to offer tailored services [that customers] want to pay for, so that want becomes a necessity.”

Matt Pruznick is senior editor for Residential Systems and Systems Contractor News. Follow him on Twitter @Pruznick.