Recurring revenue is at the center of almost every security business model. It is the lifeblood that every dealer either thrives on or struggles to build. However, not all recurring revenue is equal. Recurring monthly revenue is both the revenue that you earn on a recurring basis and efforts to improve that number. Many security dealers could benefit from investing in their RMR processes.
The Value of RMR
Building recurring monthly revenue may be more complex than you would expect initially. It isn’t simply billing customers on a monthly basis. Instead, it takes into account many factors such as building a strong value proposition, enhancing cash flow, minimizing outstanding accounts receivable and increasing revenue without increasing costs.
Optimizing each of the above factors (and more) can require significant time and effort. However, it is worth the investment. The following are a few reasons why RMR is so important to the alarm business:
- Maximum Profitability: Although it is called recurring revenue, the ultimate goal is actually profitability. Typically, the main focus of RMR is on improving the value of each customer, rather than simply bringing in new customers. There may be significant money to be made with a relatively modest investment.
- Greater Company Value: Most company owners are interested in building their wealth through the business. In the security field, a business is usually valued based primarily on its recurring revenue. Therefore, working to maximize monthly revenue can also increase the company value and position owners well if they ever want to exit.
- Focus on Innovation: Many of the best opportunities in RMR are on the cutting edge of technology. Thinking actively about how to increase monthly revenue, especially on a per-customer basis, will help you to keep your business on the leading edge of the industry.
- Most Reliable Long-Term Model: Ultimately, there is no better business model for the security industry than one founded on recurring monthly revenue. It is both rewarding in the short-term and sustainable long-term. Investing in this area will almost always pay off significantly.
Common Reasons for Poor RMR
Despite the importance of recurring monthly revenue, many security dealers do not sufficiently invest in this area. Many have a lot of space for increasing their revenue but may not realize it. The following are a few of the common causes of suboptimal revenue:
- Outdated Services: The security industry is more competitive than ever. Technology has enabled new entrants to offer impressive value propositions to their customers. Many dealers may experience declining or stagnating RMR because they have an outdated slate of services and products. Failing to stay competitive can lead to serious revenue problems.
- Poor Service: This business is not just about keeping people and property safe. It is also about serving customers so that they feel safe and well-maintained. Some dealers have excellent offerings, but they provide less-than-ideal customer service. This can lead to customers leaving for stronger competitors.
- Insufficient Offerings: You may offer the best-of-the-best in a few aspects of security, but your customers are simply looking for a more comprehensive solution. This can hurt in two ways. First, would-be customers may move onto competitors with broader offerings. Second, you may be missing out on potential RMR for services your customers are willing to pay for.
- Bad Legacy Processes: A lot of dealers are weighed down by processes they have had for years or even decades. There may be a lot of unnoticed inefficiency in your business. By evaluating your business processes and improving them, you may be able to significantly increase your profitability.
Strategies for Implementing Effective RMR
There are many ways that your security dealer business can improve its recurring monthly revenue. It probably comes as no surprise that the specifics depend greatly on the business. However, the following are three areas that almost every company can focus on to enhance RMR.
Increase Your Revenue Realization
How do you manage your billing cycles? Is it currently possible for customers to pay for a prorated amount if they sign up mid-cycle? Implementing a billing system that can allow for this is a simple way to bring in revenue that may be currently completely missed. Additionally, a new billing process may help you to reduce your outstanding accounts receivable.
Improve Back-Office Efficiency from Proposal to Payment
For many security businesses, the process from creating a proposal to accepting payment involves multiple teams and several different systems. This is highly inefficient. Integrating systems into a single, rationalized workflow with high data visibility can help you to improve RMR.
Invest in Security Integration and Automation
Many customers are seeking solutions that include life safety, video surveillance, sensors, environmental controls, and home automation. Investing in these areas could help you to keep customers longer, earn more revenue from them and attract new customers. Furthermore, automation can help you to run a more efficient, profitable business.
Get the Right Tools for Your Recurring Revenue Needs
The right software can help you to significantly increase your security dealer business’s RMR. SedonaOffice and AlarmBiller have valuable features for improving your back-office efficiency. They can help you to bring in more recurring monthly revenue while spending less to learn it. Learn more by contacting Bold Group today.