Building Monthly Recurring Revenue (1)

Building Monthly Recurring Revenue

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Last week we didn’t get any new MRR. MRR is Monthly Recurring Revenue. Now, once a week we have KPI’s that come out, our Key Performance Indicators. We have several of them. Some of them are management level, some of them are for our operations team, but every single week we determine how we’re doing and if we’re on target for our goals.

One of our goals in the management report is new MRR for that week. So how much did we sign up in brand new contracts for monthly recurring revenue? Our goal right now is $2,500 so every week we want to get on average $2,500 of new monthly recurring revenue. Now, how did we come up with $2,500?

Setting Sales Goals for New Monthly Recurring Revenue

Frankly, we pulled it out of thin air. We started at a thousand we got a little bit feedback from some people and they said, you know, I really should be a little bit higher because some weeks you won’t hit it at all. Some weeks you’ll hit it a little bit less. Some weeks you’ll hit it a little bit more, but $2,500 sounds about right.

So we said, okay, $2,500. That’s our goal. Once we had a goal, we started to march towards it and we started to measure and you get what you measure and we’ve been kind of good. We’ve been in about maybe $2,000 on average for the last three months.

Building Monthly Recurring Revenue

Figuring Out Weekly Growth Goals

I’m kind of guessing, I don’t have the spreadsheet in front of me. Since we got no new MRR last week, it really got me thinking like for real, what do we need to bring in every single week in order to go from $1 million in 2018 to $100 million in 2030? So I woke up early this morning, I started to think about it and I opened up google sheets and I started to figure it out.

And what I did is on column A, I have all of the months starting in January, 2019 going forward into the year 2030 and I stopped at June. I figured if we don’t hit it by June, we’re in deep trouble.

So June of 2030 and then horizontally across the columns, I did the same thing January from 2019 all the way out to June of 2030. I started to put numbers in and basically if we were to get x number of dollars in say January, then it contributes to January of 2019 but it also contributes to February of 2019 and March and April, etc. And then next month we add to that, the month after that we add to that.

Now this model assumes that we will have no one dropping off, right? That we’re not going to lose a single dollar in revenue once we get it, which is not reasonable. So the model is not that sophisticated. So one of these days I’ll get with someone, and we’ll figure out a really sophisticated model.

We Need to Add $10k Per Month Until 2030

But what I learned is that very, very optimistically we have to add about $10,000 per month every single month to go from $1 million in recurring revenue, annual recurring revenue to $100 million of recurring revenue by June of 2030.

There was a little over $10,000, and when I divided by four in order to get it two weeks, which even that is not a hundred percent accurate because there’s not consistently four weeks in a month, it’s more like 4.33 I believe.

Anyways, simple model. It came out to $2,600 so I was very surprised that it was very, very close to the number that we pulled out of thin air. We had no basis for, but you know, right now we’re tracking at $2,500 as our goal. We really need to be at $2,600 and the reality is it needs to be more, like I said, it’s a super simple model.

It’s not good enough for the time being, it’s fine, but in the end, realistically it’s not going to get us where we need to be. So I don’t know what the actual number is. I still need to do some more work, but it’ll probably be around $3,000 maybe $3,500 every single week that we need to get and begs the question, can we consistently do that?

Building a Salesforce

Right now it’s me and Kevin Daisey bringing in new deals. Then our operations team is finding opportunities to increase adspend and provide the services for our existing clients that need it. But it’s, it’s just, you know, it’s a couple of guys that are doing the best they can.

The real lesson learned for me is we’ve got 11 years of hard work to do and we need to get bigger accounts, that’s for sure, but we need to start investing in a salesforce. So we have a sales force effectively of two people, maybe even one and a half because I’m not a hundred percent sales.

We need to grow sales force, so that’s going to be my focus for the next month or so. Trying to figure out who to hire, when, where, etc.  

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© 2019 Array Digital LLC
© 2019 Array Digital LLC