The New VAR Business Model for Recurring Revenue

Now that you’ve established a strategy for transitioning to the recurring revenue model, how do you ensure its success? 

In order for VARs to embrace recurring revenue and move away from project-based sales, everything about their operation needs to change, beginning with the way they think about customer service.

The primary difference between customer service in the transactional model versus a subscription-based or recurring model is that the latter requires a constant, ongoing effort. 

According to a 2016 survey by Geoff Ashley & Associates targeting 200+ Microsoft partners, the majority of VARs had less than four proactive customer communications per year. Most of them did not provide service according to the customer lifecycle and thus grouped customers into a single category.

This lack of providing constant support to customers and understanding of where they are at each stage in their lifecycle will need to change if VARs want to successfully transition to the recurring revenue model.

Putting Value to VARs: Key Trends

When your business depends on returning customers who will renew their subscriptions as opposed to those who only purchase once, the quality of service you provide becomes a significant selling point. When your customers know they can rely on you for support, you gain an advantage over competitors who offer similar services or products.

So what goes into ensuring this type of high-quality support? Here are some key strategies for running a stellar customer service operation.

Invest in round-the-clock tech support

With more and more businesses relying on software applications to conduct all aspects of their business from finance to customer relations, providing 24/7 technical support has become the cornerstone of great, reliable customer service. VARs who have the proven ability to offer readily available support for their products will be favored by companies that don’t want a technical problem to interrupt their workflow.

Smoothen out your IT communications by offering a single point of contact (SPOC)

To provide customers with the optimal experience, VARs must streamline their IT communications so that clients aren’t left bouncing around from one contact to another whenever they want to resolve a technical ticket. This is especially important for IT support, as the technician is not always the best person to communicate with the customer directly, and the support agent might lack the advanced technical knowledge to solve the ticket themselves. Streamlining your IT support communications so that customers have maximum transparency and reliability will go a long way toward improving the quality of service. 

After the initial onboarding process, provide strategic growth services

When thinking about working with customers long-term, the key to playing an invaluable role is to become a strategic partner, rather than a service provider. If VARs can position themselves as authorities with expertise on how to help their customers’ business growth, transitioning to the recurring model will be more seamless. These growth services can include offering cloud management, sales automation, and building more efficient front-office processes. 

Big Data services offer new avenues for growth

According to the International Data Corporation (IDC), the big data and business analytics solutions (BDA) market will grow at a compound annual growth rate (CAGR) of 13.2% in the next few years, reaching $274 billion in worldwide revenue by 2022. So why is this important for VARs? Big data opens up new business opportunities as VARs providing big data solutions will become strategic partners for business growth in the future. IT services are already the largest category of the BDA market ($77.5 billion), followed by hardware purchases and business services. As more businesses look to expand into big data, VARs who have ready-made solutions and services in this market will become indispensable.

Big Data services offer new avenues for growth

VARs Recurring Revenue Business Model: Productized Services 

Although there are ways for VARs to identify services that will be particularly well-suited to the recurring revenue model, these services ultimately depend on stellar customer service. Unlike the one-off sales model, recurring revenue requires constant attention to detail and high-quality service to attract repeat customers.

That said, here are some ways for VARs to achieve recurring revenue through productized services.

#1. Productize services that require regular maintenance or support.

Before transitioning to the recurring revenue model, examine which of your current services and capabilities speak to long-term business needs on the customer side. Ongoing maintenance, tech support, and cloud services can all be provided on a recurring basis. Additionally, look into evergreen services for your customers, such as sales lead generation, marketing automation services, and content needs that can be outsourced. These are all services that can be provided year-round. 

#2. Package these services as a unified, streamlined process.

As businesses move into digital products and services, one of the problems they often encounter is that they have to deal with multiple points of contact across numerous partners all offering separate services. VARs can reduce that headache by framing their ongoing services as an integral part of business operations. From onboarding and ongoing tech support to cloud management and big data analytics, VARs can effectively streamline time-consuming business processes and offer customers a single, integrated solution through their services.

#3. Charge a monthly subscription fee.

The key to any recurring revenue business model is an ongoing contract, which can be achieved through a monthly subscription fee. Think about the core services businesses might need to create a monthly package with additional services available for purchase or offer upgrades based on more advanced business needs so that your solutions are affordable and appropriate for different types of businesses, such as SMBs or enterprise.

How to Ensure Success of Recurring Revenue Model for VARs

With your services and models in place, the best way to ensure success in this new venture is to work with the right people. This pertains to both finding the right salespeople and customer service personnel as well as identifying good clients.

Transitioning to recurring revenue doesn’t require VARs to acquire new customers from scratch. Building on existing relationships, particularly with customers who might be interested in ongoing services, can provide a good starting point. 

However, in order to effectively communicate the new business model, sales teams should be retrained with the correct scripts for a recurring revenue relationship. Since many salespeople are trained for single sales and contracts, it may be necessary to identify and recruit those with prior experience in the recurring revenue model. Sales commissions will need to be remodeled to be based on monthly recurring revenue (MRR) as opposed to the size of the sale.

Once you’ve identified the right people for the new model, there are other strategies that can set you on the path to success.

Adopt the Agile method for maximum learning and minimal disruption

Businesses going through a major transition become vulnerable to customer churn. In order to avoid this disruption, it’s vital to communicate properly with customers and avoid overselling in an attempt to entice them to your new business model or services. Before moving customers to the new model, talk to them to help them understand how this can indeed be the right fit for them. Don’t oversell your services, which will only result in disappointment for customers. 

Plan for unexpected events and see this period as a learning opportunity to perfect the new sales process and model. Embrace the agile way of working, which places more focus on incremental improvement and continuous optimization rather than releasing a single perfect end product. 

Because your sales team will need practical experience to adjust to the recurring revenue sales model, it’s unrealistic to try and perfect the process before offering the new services to customers. Instead, work to ensure minimal disruption for your customers by making sure your existing services won’t suffer from the transition.

Automate your internal processes to increase profit margins

Not only is it important for VARs to help businesses automate their processes, but it’s essential to automate their own internal operations to deliver at scale. The more time your sales team spends on administrative tasks, the less time they have to acquire and communicate with new and existing customers. 

Use data and analytics to track sales metrics and put in a system that allows for more efficient communication between internal stakeholders so that no one drops the ball in the process. AI-based platforms like Boomtown can help automate these systems and deliver recurring models with 30% margins, as well as generate predictive data to plan for the future growth of your business and avoid potential pitfalls before they occur. 

Boomtown Technology Product Support Solution for VARs

Boomtown’s product support solution specifically aims to help VARs transition smoothly to the recurring revenue model by simplifying the process of selling and activating technology products. VARs can use its white-labeled software and services to make ongoing customer management as painless as possible and achieve faster revenue growth and reduced costs while keeping customers happy with quick activation and 24/7 service.

Get in touch with Boomtown today to schedule a demo.

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