Most organizations have operational gaps with respect to filling the void between new business and recurring revenue.  Identifying and addressing these gaps are critical for any business, but especially critical to a SaaS company whose ratio of recurring revenue to new business grows increasingly disproportionate over time.  The problem is implementing a repeatable process and developing a comprehensive recurring revenue platform that will drive you from new business to repeat business in a consistent, forecastable, maximized, and efficient manner.

Data integrity is the foundation for the 4 Structural Tenets of Recurring Revenue.  Without quality data, none of the following is possible.

Tenet I:  Customer Success Management - Client Retention and Growth Profiles

The first structural tenet of recurring revenue revolves around client retention and growth.  At a minimum, how do you keep a client?  More importantly how do you continue to grow your footprint within an organization?  Another term that is used for this is customer success management.*  Technology drivers have trended toward lower TCO and Ease of Implementation; which has resulted in solutions that are not intrinsically sticky.  Thus something more is required than traditional account management; that something is customer success management.

The process of managing success actually begins long before a prospect becomes a customer.  If you are trying to get close to and understand a customer strictly for the sake of securing a renewal, you’re already behind the eightball and the exercise will come across as disingenuous and will ultimately fall short of its full potential effectivity.  Managing success needs to be aligned with the sales cycle and it needs to be applied because there is pride in one’s business, product/service offering, and professionalism first - the revenue is secondary.  During a sales cycle, a prospect is “touched” by various entities in your organization.  At each point of contact discovery is done with the ultimate goal of understanding a potential customer.  If there is a structure around the discovery and then a workflow is associated with the collection and storage of what can now be considered “data points”; you end up with a comprehensive customer profile that can be used for retention.  It is imperative that this data is stored appropriately and can be accessed easily by anyone who needs it.  This data combined with pointed implementation notes provide the baseline for the retention profile.  Additionally a pre-determined schedule of continual customer touch and account discovery will assist in filling in gaps in account knowledge, and will also project the proper image of genuine care and consultation - as opposed to something more overtly self serving.

Correlating historical and real-time data points about the customer with implementation notes and the aforementioned sales cycle data points allows you to leverage business intelligence to describe and analyze what a customer has done, understand what they are doing, and predict what they will need going forward ensuring you remain a centerpiece of that growth and activity.

*Customer Success Management consists of:  implementation, support, and Account Management - the more seamlessly the handoffs between these groups occurs within your organization; the happier your client is going to be.  The more intel you have in your Account Management efforts, the better you’ll understand your clients thus building a strong retention case and enabling you to target feasible areas for growth.

Tenet II:  Renewal Operations - Quote to Cash

Time is money.  If it isn’t the first rule of business, it is certainly the first rule of hustle.  It is no secret that anything that increases efficiency saves time and inherently makes money.  Some will tell tales of multipliers and economy of scale suggesting that the operations behind a recurring revenue platform can increase revenue by x%.  Much like suggesting that the renewals narrative can be represented by a solitary percentage, this notion is insulting.  Recurring revenue is a system comprised of many functional parts.  This system, much like many other systems in life and the business world, follow an 80/20 rule.  Any recurring revenue platform is 80% quantitative and 20% qualitative.

Eighty percent of the renewal process can be automated and made to work in a clockwork like fashion - given that you have the right person and CPQ tool at the helm.  Utilizing the right tools; quoting can be made quick and effortless.  Accepting, booking and fulfillment of orders can be made seamless.  With such a large portion being quantitative, there is an overwhelming temptation for some to automate the entire process and ignore the portion of the process that is qualitative and requiring human touch.

Time is money, so by no means can too much time be spent on the quantitative aspect of the process.  The quickest way to ensure you have a functioning process is to address the quantitative 80%.  Flexibility and scalability is defined in the 80; however, consistency and growth is found in the 20.  The most consistent theme amongst the structural tenets is the use of data as information and that is no different here.  The 20 is where you use the business intelligence gleaned in the other tenets to position an appropriate offer and drive a deal effectively.  This is where decisions to extend terms, cross-sell, up-sell is handled.  This is also where a team is trained to do objection handling, channel management, conflict resolution, and where accountability is maintained through various performance indicators.  A world-class recurring revenue platform that assists in driving your business to new levels is going to be developed by adequately addressing the 80 and then focusing on the 20.  The 20% is literally the difference between satisfactory and great.

Tenet III:  Renewals Narrative - Unified View

It is inevitable.  At some point, like a moment of annota, the question will be asked:  what is our renewal rate?  Somehow, someone will come up with a solitary percentage as a response.  An entire recurring revenue practice is being reduced to a number.  The truth of the matter is; that is a tremendously loaded question.  What does the number mean?  How much insight do you have into where that number comes from and what it represents?

Renewals is not a number.  Approaching it in the most rudimentary of ways imaginable, it is at least a collection of numbers and percentages.  However, most accurately, renewals is a narrative.  It is the story that second level analysis of variables and performance indicators tells about the overall vitality of your business.

Sales, Marketing, Finance, Engineering, Operations, PM, and Support are all stakeholders that can glean valuable information from the Renewals Narrative. In order to make this possible pertinent data must first be collected and contextualized so as to make it information.  Secondly the information needs to flow freely throughout an organization.

The renewals narrative hinges on how you decide to represent change over time both at a granular account/opportunity level and at a macro organizational or platform level.  There will be raw numbers and percentages; but at its best, the renewals narrative is the foundation of lifecycle management and can help answer questions like: are customers happy, do products appear to be priced appropriately, how strong is my brand, how sticky is my product and does it stick in some places more than others, is there an urgency to renew on time?

A strong renewals narrative can easily answer these questions and more if thought out and implemented deliberately.  Most importantly, the uniform representation of this narrative ensures that all stakeholders are properly aligned and doesn’t leave anything subject to an individual’s interpretation of the data.  A unified force is typically a strong, effective, and efficient force.

Tenet IV:  Business Process - Governance

At this point all of the tools of the trade are in hand, but just because you give someone all of the tools it doesn’t make them a carpenter and it doesn’t mean they can build you a house.  The true magic behind all of this is how it all plays together and how all of this plays together is your business process.

There are a set of well thought out rules that will govern every single aspect of a recurring revenue platform and they are (by definition) unique to every single organization.  What are the Rules of Engagement between the field and the renewals organization?  How will you measure efficiency and scalability?  How are you auditing your workflow triggers?  Do your comp plans drive the desired behaviors for your process?  Are your SLA’s appropriate, and do the Terms and Conditions align with the overall business objectives?  How will we work with the channel and what is the procedure for dealing with conflict resolution?

Most importantly, who is tasked with asking and answering all of the aforementioned questions and what is the opportunity cost associated with having the wrong person(s) tasked?

Process begins as a list of questions and ends as a system of equations and rules through which you drive different variables with the intent of producing a desired outcome.  With the right mind driving the process, maintaining data integrity best practices, and best utilizing the tools available - a world-class recurring revenue platform is very attainable for any organization.