Is the recurring business model a guarantee of stability and sustainability for your Cloud and Telecom business? At Sewan we believe this is true. So why is it essential to include a recurring business model in your business strategy? Let's take a look at all the advantages of this type of business model.
Let's start with a definition of what a recurring revenue business model is. Recurring revenue is a form of business strategy that is based on predictable revenues. Your customers pay regular instalments (monthly or annually) after having subscribed to contracts of varying lengths (usually 12, 24 or 36 months). This recurring business model therefore ensures a constant flow of income. This provides greater medium and long-term visibility for the development of the business.
In brief:
- Definition and benefits of the recurrent business model
- Structural and commercial benefits
- How this applies particularly to a Cloud and Telecom business
1. For your growth: stability and visibility
The benefits of the recurrent business model are numerous. However, they can be divided into two categories (which remain intrinsically linked, of course): the benefits for the overall development of your business and the benefits for your commercial activity.
So let's start with the benefits of recurrence on the development of your business and its growth : stability and predictability. If we could, we would make recurrence rhyme with serenity. Why is this model stable? Because it is based on a contract with commitment. The length of the commitment can vary, but most often it is 12, 24 or 36 months. From the moment your client signs the contract, you know that you can count on his income during this period. You are therefore less subject to structural variations in the market as can be the case for companies based on the one-off sales model.
It is this very stability that gives you greater forecasting power. You know the start and end dates of all your contracts: you can therefore easily estimate the variations in your turnover. You can estimate the number of new contracts to be signed to compensate for any contracts not renewed. This ability to forecast is invaluable for your strategic development plans: it becomes easier to plan investments or new recruitments in particular. Moreover, the cumulative stability and forecasting capacity will have a reassuring role with banks or investors in particular.
2. For your commercial strategy: loyalty and business opportunities
Has your customer just signed a contract for 12 months or more? Great, you can plan your income for that same period... But you can also start building a virtuous business relationship now!
The recurring business model works in tandem with the loyalty principle. You follow the evolution of your customer's needs or you help them evolve by detecting possible avenues for improvement. This can be referred to as up-selling, progressive cross-selling or moving upmarket: you build customer loyalty. Taking care of your customer relations, being proactive in the solutions you propose is part of the commercial activity that takes place over time. If the customer is satisfied with your services, if they are in line with his needs and the price he asked for, he will become loyal and renew his contract. The business relationship continues to improve over time and your income is always guaranteed. Thanks to the recurring business model, you increase the value of the turnover over the entire duration of the contract with your customer. This is known as "customerlifetimevalue " optimisation. It is also worth noting that it is easier and cheaper to retain a customer than to recruit one.
Retention and loyalty are one thing. But recurrence also allows you to give rhythm to your commercial relationship and all the actions and activations that go with it. The most convincing way to do this is to highlight the period close to the end of a contract. You can see that the end of the contract is approaching: this is an opportunity to contact your customer again, to gauge their satisfaction, or even to make them a special offer. There may also be events around contract anniversaries or according to a certain length of service. All this commercial activity is made possible by the durability of the relationship induced by the recurring business model. All these opportunities do not exist in a more punctual model.
3. The recurrence model in the Cloud and Telecom market
In principle, the recurring model is the opposite of the one-off sale where you offer a service or product, your customer pays you, you perform the service or give the product, end of transaction.
As a Cloud and Telecom service provider, the solutions you offer to your customers are (mostly) intended for a short or medium term commitment. You are addressing companies: they need this commitment scheme. We install their telephony, deploy their Internet access or organise their data hosting on a long-term basis. Communication, Internet access, data backup and hosting: these are relatively unchangeable requirements for the operation of your company/customer. Therefore, recurrence is already a matter of course in the Cloud and Telecom market.
