It’s a catchy title, but why is an analytics company telling me about growing my monthly recurring revenue (MRR)? While many believe this advice should come from a marketing firm, we know that the best marketing strategies are based on good data. That is where we come in. We believe the numbers should tell the story. This is one we heard by listening carefully…
In a Survey of 32 MSPs, Here's What We Found
Here at MSPCFO, we recently added the functionality to our system to allow us to see how MRR changes over longer periods of time. We could always see what was happening on a very granular basis for monthly changes, but now we can see
- Changes quarter to date (QTD)
- Changes year to date (YTD)
- Changes over a custom, user-defined time period
When we look at the changes in YTD MRR for a sample of our clients (we selected 32), we discovered something very interesting:
The largest driver of growth in MRR is not new customers. The largest driver in increased MRR is the growth of existing customers.
When we look at MRR clients, we want to know whether or not clients are changing. They could be:
- Shrinking, or
What Your Income Statement Is NOT Telling You
If you look only at the income statement, you could miss the trees for the forest. Each client in your portfolio may be changing. When they off-set each other most months, it is difficult to see what is happening on a client by client basis. This is why we decided to take a closer look.
In this sample, we only looked at MSPs that are growing their MRR because that is what we want to emulate. We looked at:
- MRR Labor vs. MRR Product (e.g. cloud).
- Big vs. small companies based on monthly MRR.
No Matter How You Dice It
The answer came out the same each time, each way we looked at it! 55-70% of the growth portion of MRR was driven by existing clients. In about 60% of the cases it was even enough to cover the combined decline and loss in from clients that were Shrinking or were Lost. What does this mean to you? Based on the research, the most fertile area for growth in MRR is centered within your existing client base.
Of course, this does not mean that you should stop prospecting for new clients.
New business still accounts for 40% of growth, so you absolutely need to put effort behind it. If you need help, call our friends at Managed Sales Pros (shameless plug – sorry).
The actionable takeaway from our findings?
You need to spend an appropriate amount of time finding more ways to grow your MRR with your existing clients if you want to become a more profitable MSP.