If you only sell products and services – if you have no sources of recurring revenue, then you are not as strong as you can be.
It doesn’t matter whether you are a consultant working from your house, or a $100 million per year solution provider.
Your customers have more ways than ever to get the products they want, and they have plenty of research tools available to make sure they are getting the absolute lowest prices. They can (and will) shop you against other providers every chance they get.
Service project sales have longer sales cycles, and, while they may be very profitable when they come, they are unpredictable. Worse, virtualization and cloud based “as a Service” technologies extend the time between the need for frequent service projects – customers don’t need you to deploy virtual servers or configure their own SPAM filtering like they used to.
Selling products and services requires continuous expenditure of time and money, and both are subject to too many external factors; if you aren’t selling, no new revenue comes through the door.
- If your sales rep is sick, on vacation, or unavailable, you miss sales
- If somebody is able to undercut your product pricing, you miss sales
You see the point.
Recurring revenue changes all of that. When you add sources of recurring revenue in addition to products and services, the game changes.
I explain this in more detail in my post Why Recurring Revenue Is So Important For Your Company