Monthly Recurring Revenue (MRR)

25-Jan-2021

MRR stands for monthly recurring revenue. For example, if you have 10 customers that have set up a recurring order at $50 / month, your MRR would be $500.

What is Monthly Recurring Revenue (MRR)?

MRR is a common term in SaaS companies, but it's a useful area of focus for every business of every size.

How could your business create some kind of subscription or membership and offer a price discount in exchange for customer loyalty? Companies like Amazon incorporate this concept with their subscribe and save program; With this option, customers can receive a small discount by pre-ordering the products they buy regularly.  This is a win for the company because they've secured the order; This is a win for the customer because they don't have to worry about ordering the product again and they get a cost saving. 

Create a Recurring Offer

There are so many ways to create a recurring offering. When you start thinking of these, you see opportunities everywhere. People in service industries tend to think in services; While product sellers tend to stick with products, but mix & match works just as well!  You see this when you purchase furniture and are then offered installation or moving service. 

In every case, we convert a 1 time sale into a recurring sale. 

  • I worked with a roofing company whose primary sale is a 1 time roof replacement, usually a once in a lifetime purchase. We tacked on a monthly membership of $100 / mo for a 2x per year roof and gutter cleaning. The company wins with increased MRR & regular work for slow times; The customer wins with prolonging the life of their new roof!
  • I've worked with several hairdressers & estheticians who's primary sale is a 1 time service, often once every 3 months. We added a monthly product subscription offering- Custom tailored to the individual client- so clients pick up 3 months of hair & skincare products at their regularly scheduled appointments. The companies win with increased product sales; The customer wins with convenience and enhancing professional service with proper home treatments. 
  • I worked with a home repair & maintenance company, they were struggling to keep income regular. We developed a subscription model to homeowners at $399/mo for 6 hours per month of repair / maintenance work. This offering allowed homeowners to secure a reduced price of $65 / hour labor and stabilized cashflow for the company. 

Obviously, every business benefits from regular, recurring income. But increased income is just one of many benefits. 

Why Monthly Recurring Revenue Matters

Focus on the Long Game 

Anyone who has worked for 100% commission sales has experienced the stress that comes with a down month. Maybe a big sale fell through last minute, maybe there was a personal or family emergency that took you out of the game for a week or 2, or maybe, you decided to take a week off for a vacation.  Whatever happened, when sales are down, stress is up. 

Speaking from personal experience, when stress is up, problem solving, critical thinking and long term planning are far more difficult, not to mention doing what is best for the client. We go into survival mode. The only thing worth talking or thinking about is the next sale and we can get into a vicious cycle of chasing the next sale. We might be tempted to sell someone something that is not the best option for them, just to pay our bills. None of this will benefit the business or the customer in the long run. 

By increasing MRR to at least a baseline level to cover operating costs, pressure and stress are reduced. This allows the business owner to focus on developing long term, mutually beneficial programs, products, and service offerings, all which will result in happier customers & employees. 

Solve More Problems, Earn More Money

All of the examples listed above are solving an actual customer problem related to the original service. By offering the add on, recurring product or service, the business owner is helping their customer be as successful as possible with the initial purchase. 

I framed all of the recurring programs as an add on; In other words, an up sale offered after the first sale. However, any of the above could also be utilized as a down sale if the customer is unable or unwilling to make the initial purchase. For example, let's say you are attempting to sell a customer a monthly facial to reduce wrinkles and redness. But she simply cannot afford the monthly service, even though you know this would be the best option for her situation.  Rather than send her out the door with nothing, you offer her products she can use at home and follow up with some DIY educational material. While it's not the absolute best option, you've helped the client reduce their wrinkles and redness, save money, and... you made a sale :)

Cultivate Real Customer Relationships

By providing a regular, recurring service or product to your customer, you are staying top of mind, naturally. You will be talking with you customers at regular intervals about your area of speciality. You will take notes and remember what is important to your customers, what their goals are, what their concerns are, and how to best work with them. 

You will feel loyal to them, and they will feel loyal to you. As your relationship develops, they will naturally refer their friends and family to you. They will engage with your social media posts and be rooting for your success. 

Sagareus Real Estate Example

As a business owner, creating MRR streams stabilizes income and provides the opportunity for your sales reps to create MRR for themselves as well.

At Sagareus, we created a system for our sales Advisors to create MRR through Property Management services.

As an example, most of our Advisors have a stated MRR goal of $3,000 / month; Below is a breakdown of the splits for the Advisor & the Firm. 

Let's assume the average per unit rent amount is $1,200 / month and average Management Fee is 7%:

  • Per Unit Management Fee = $84
  • less $12.50 / unit = $71.50
  • divided by 2 = $35.75
  • $35.75 / $3000 = 83.91units

Using these assumptions, this Advisor needs to close and manage 84 units to achieve his goal of $3,000 / month. I recommend he focus in on 4 to 12 unit properties to achieve this goal, so let's say his Portfolio breakdown looks like:

  • One 11 Unit Property
  • One 10 Unit Property
  • Two 8 Unit Properties
  • One 7 Unit Property
  • Ten 4 Unit Properties

This Advisor needs to 15 close deals to accomplish this goal.

Earn MRR with Sagareus Real Estate!

Licensed Real Estate Brokers have 2 options to create recurring income with Sagareus Real Estate:

  1. Join the Sagareus Team - Sagareus Advisors earn Monthly Recurring Income in addition to Sales Commission based on their own goals and activities. Learn More about hanging your license at Sagareus HERE.
  2. Property Management Referral - With our easy management referral program, licensed brokers can earn RECURRING INCOME by simply introducing potential clients to Sagareus Designated Broker.  Learn more about this program HERE.

 


BB French Real Estate

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