MRR is a term that originates in English and means Monthly Recurring Revenue. In a free translation, it would be something like Monthly Recurring Revenue. Its calculation is based on what customers pay companies monthly for their service subscriptions.
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Is this, however, something new for you?
New or not, the truth is that many companies adopt this metric in their business. Especially Saabs companies.
This is a very valuable indicator for organizations. Its concept and calculation needs to be fully understood by entrepreneurs who, in their business, sell recurring services.
More than that. It is necessary to be clear and also pursue ways to increase the MRR on a daily basis.
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After all, this is a safe way for companies to grow and become more and more a reference in the area in which they operate.
Do you know what MRR is and how to increase it? So check out this article.
What is MRR and how can you calculate it?
MRR is a metric that serves to bring predictable monthly revenue to companies that sell subscriptions. And this usually happens with services, but it’s not uncommon with products either.
Your control is essential. When done correctly, it is possible to accurately analyze the growth of commercial earnings of companies.
After all, it is much easier to measure what comes in, what are the plan renewals, upsell and also eventual cancellations – the so-called churn.
It is the MRR responsible for a kind of “junction” between the financial and strategic areas.
With good monitoring, it is possible to have a decision on which sectors need investment to contribute to improving the operation’s commercial results.
But to understand how well the business is doing, you need to calculate monthly recurring income.
If there are monthly plans being sold, the MRR can be calculated by taking the simple amount left by the customer each month.
But what if there is annuity, for example? Let’s say the user paid 12 months in advance.
The calculation remains quite simple. Take the amount paid for the subscription and divide it by the number of months it will be in effect.
Simple, right? Let’s go to a practical example to make things easier.
Think of a company that has 10 customers who pay 100 reads a month. She has an MRR of 1,000. That’s because 10 x 1000 = 1,000.
Let’s say 5 new customers enter. They hire the most expensive subscription plan – which costs 250 reads.
In this case, the MRR would go to R$ 2,250.00. After all, the bill would be: 10 x 100 + 5 x 250 = R$ 2,250.
But pay attention!
When making this calculation, it is necessary to pay attention to some items. Without it, the numbers can be unrealistic and that can harm your business’ strategic planning.
Therefore, note issues such as:
- Deduct the discounts given from the calculation;
- Deduct from the calculation the fees for the means of payment used;
- Exclude one-time payments (people who will not stay with the company the following month);
- Convert foreign currency signatures to national currency;
What are the impacts of MRR and when is the metric ideal?
A less “chaotic” scenario, more secure and with the possibility of envisioning the company’s growth.
This is one of the most positive impacts that MRR brings to those who sell subscriptions. It brings security in the day-to-day operations to know the sales forecast.
The task of how to retain customers is also much easier. After all, with a good monitoring of sales metrics, it is possible to identify when there is a greater number of churn.
You may notice that this happens seasonally, for example, every beginning of the year. Identifying this, companies can offer discounts for annuity payment as a way around the issue.
In addition, it is possible to know why in some months sales are high and in others they drop a lot.
When it falls, the MRR gives the security of knowing what is the minimum that will go into the company’s cash every month. Based on this understanding, it is possible to always act with assertiveness.
After all, in the worst case scenario, you’ll know what you can’t do because of your budget already adjusted and directed towards what the company operates today.
As for the “best of the worlds” there is no definite number or %.
The truth is: the more subscriptions sold, the better. As long as, of course, the company has the capacity to deliver with quality to users.
Be prepared to grow
Look closely. In relation to the last sentence of the paragraph above. It is essential to maintain the quality of delivery that the company has, while having fewer customers, as this number increases.
The customer’s success is vital and simply cannot be overlooked. Structure a well-structured customer success sector.
Have professionals focused on ensuring that users and/or subscribers are always satisfied.
It is necessary to have a structure to keep the customers conquered and anticipate possible churning.
How to increase MRR in your company?
There are many efforts that can be directed towards increasing the company’s MRR.
Inbound marketing campaigns are inexpensive ways to pursue higher lead generation.
But this is not always something that improves business results in the short and medium term.
If there is a need for an immediate increase, it is necessary to act more incisively. And be clearer in the solutions taken.
Even if you prospect better, often the values that come in fall short of expectations. Or far from what is needed for the month.
Therefore, we set aside 3 days on how to increase the amount received monthly with subscriptions.
Before we talk about it, remember: with more customers, there are more responsibilities.
It is necessary to have well-structured processes to avoid dissatisfaction and, consequently, always have people happy with your brand.
Let’s go to tips?
1 – Exchange the free plan for the trial
The first step you can take is to stop making a free subscription or plan available.
Keeping it can be dangerous, as people can get away with it.
They can adapt to the free plan and complement its use with some other external tool, for example.
If the idea is to attract customers by giving part of the access to your service, why not adapt this strategy?
A good solution for this is to stipulate a trial period. And then it is not necessary to provide part of the solution (but if you want to do that, no problem).
In this trial period, it leaves all features on display, available. But only for 15 days. 10. One month. Whatever. You will know this period better than anyone else.
During this time, build relationships with that prospect.
Send emails showing how the solution works. Share success stories. Show videos of features in practice.
And start awakening in him a sense of urgency from the bottleneck of his trial time.
If the experience is positive. If he is nourished with information that it is worth signing, the sale will come much closer.
Put the SDR in contact with this lead when the trial is over. Ask him questions and, in case of positive feedback, put the seller in contact with him.
More than that, show that payment is made easy. Give him a discount code if it makes sense if the deal is stuck.
This makes much more sense than having users enjoy, for free, what took so much work to develop.
2 – Raise the price of what the company sells
It may seem like a lazy strategy to simply raise the price. But, considering the context, the market, the competition, the persona of the business… it can make sense, yes.
But for that, you need to know the value you generate for your users.
Having a good relationship with the customer, you can know what your solution has brought them to gain.
And, talking too many, you measure and understand if the company is charging a price below what it could.
It is also possible to increase the price in order to have more money for investment.
Test it out and see if conversion rates have decreased, increased or simply stagnated. If either of these last two occur, you will have made a theoretically correct decision.
Measure everything that gets done. Keep testing until you know how much your customers are willing to pay.
3 – Create intermediate plans
It is necessary to always seek a balance between: what is being paid by the customer x what is being provided.
It is not uncommon for the salesperson, with the prospect on the other end of the line, to hear that the company is even taking care of their pain, but the available plan has too many features – useless for him – in addition to being very expensive.
For this, a good solution is the creation of intermediate plans. Not too basic (and cheap), but not too advanced (and expensive).
Or, better yet, customizable signatures. Thus, the user assembles, within a minimum value, the “package” that he/she deems ideal. And it will pay according to the size of what you hired.
By following these tips, you get that much closer to increasing MRR within your business.
But remember: measure everything that gets done. Use a good sales system to help you track actions and, of course, always improve processes.
So, how can we help you?
Enjoy and read two articles that can help you in your work routine.
The first one brings some sales techniques that can be applied in any type of negotiation.
The second covers some good practices in customer service.