The way we consume products and services is constantly changing, putting customers in the driver’s seat. As a result, recurring revenue models are increasingly popular – nearly half of U.S. businesses have already adopted or are considering one. Today, customers prefer the recurring revenue model as it offers more personalized, anytime access to products and services.
Recurring revenue is behind the success of giants like Netflix and Uber and quickly gaining ground in traditional industries, like healthcare (think Philip’s pay-per-use medical devices). Additionally, the Internet of Things (IoT) is rapidly increasing the number of businesses switching to recurring revenue as the ubiquity of the Internet and “connectedness” combines with affordable technology and software.
However, while it’s important to understand the need for and benefits of a recurring revenue business, it’s also necessary to understand the metrics needed to measure the success of the program. Different businesses have different metrics that define and measure success. It’s important to understand what the business’ individual goals are and pay attention to metrics specific to measuring against those goals.
Aria teamed up with ten industry experts to get the lowdown on the metrics they believe are most important in a recurring revenue business. The experts were selected based on their expertise and experience in the billing space or implementing a recurring revenue business model in an enterprise business. It’s interesting to note the emphasis on measuring revenue from existing customers, which comes as no surprise since majority of the revenue in this model is from existing customers.
Check out the top ten recurring revenue metrics below. Keep in mind that these are in no particular order and the importance of each varies with the individual business and its goals. Each metric, however, is a solid indicator of a healthy (or unhealthy) recurring revenue business. Build your business with the consumer top of mind and measure frequently to identify trends and track positive relationships and increased revenue numbers. If there are dips, analyze the cause and restructure the setup.
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