Building a Recurring Monthly Revenue Business in AV
Building recurring revenue is a hot topic in the circles of AV systems integrators. Justin Kennington, President, SDVoE Alliance, interviewed Dan Ferrisi, Editor in Chief from Commercial Integrator magazine during S2 Episode 13 of SDVoE LIVE! Dan shared his insights around what does it mean to build recurring monthly revenues? How do integrators go about finding those sources of recurring revenue? What might these models look like in the future?
Recurring revenue is a regular cadence of income which may be monthly, quarterly, or annually. This flow of income helps with cash flow and predictability of revenue streams. This is a shift from a CAPEX model to an OPEX model. This also enables integrators to build strong relationships with their clients. Once you have a client it is easier to retain them as a customer doing project after project or service after rather than doing a project, closing it out then looking for a new project with an entirely new prospect. So recurring monthly revenue (RMR) has a stickiness aspect to it that will keep you in front on that client on an ongoing basis. You are now building a trusted relationship with that client. If they have a new project or need services, you will be top of mind, potentially even avoiding a bid situation. You client may choose to work only with you because you’ve been there to support them.
Service agreements are one model for recuring revenue. The integrator will set up a monthly service plan for the client to make sure everything is running smoothly on an ongoing basis. There are several different types of services models. One is break/fix which will not produce a whole lot of RMR. On the other end of the spectrum, the service model could be as complex and ambitious as 24/7 monitoring and remote support with guarantees of negligible or zero down time. There is another idea of AV as a subscription, think Netflix, Apple Music, HBO Max. The concept here is to acquire the AV equipment to use it, not own it in the same way we use Microsoft Office and don’t own it. With this model, clients would pay monthly, quarterly, or annually. So basically, AV as a subscription.
Right now, for integrators, recurring revenue as a percentage of their overall revenue is in the single digits. But some integrators see a trend of doubling this revenue percentage each year.
Justin asked Dan, “How widely adopted is AV as a service these days?” “Is there a pattern for example a certain industry that has latched on to AV as a service?” Dan commented that there are different permutations of AV as service. Think about education or corporate venues; enterprise-level organizations that have very little tolerance for downtime. They do not have a tolerance for closing down a venue or a classroom; they do not want to send students home or have to close down a conference room when there is a very important client meeting that day. When there is a very low tolerance for failure and a high sense of mission critical excellence, that is where AV as a service is more valuable. It may not be AV as a subscription, but it is very compelling if an integrator can say to a client “I’m going to remote in within 30 minutes of a call. I don’t have to roll a truck, or say I’ll fix it on Thursday.” Staff will be available immediately so that class or meeting goes off without a hitch.
View this episode on demand to hear more details of the interview plus learn about recurring revenue models in the news.
Service-Based Plans in the news
During S2 Episode 13 of SDVoE LIVE!, Justin and Matt discussed several articles related to service-based plans in Pro AV.
- Why You Should Offer Managed Services for Client Retention
- A Little Service Over Here!
- Why Now Is The Best Time To Start Selling Service-Based Plans
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A New Era for AV over IP? ISE 2022 Wrap Up
We launched SDVoE LIVE! season 2 with a review of AV over IP at InfoComm 2021. Now we stand at the season’s penultimate episode, and we’re just back from ISE 22. How much has changed in six short months for AV over IP? What impact has the return to work had on system design? What new products have been introduced for 2022, and—perhaps more importantly—are integrators actually able to source them? Gary Kayye joins us to share his insights and a view from the show floor.
Guest: Gary Kayye, President and CEO, rAVe [Publications]