Each year it seems, we are running harder to stay in the same spot. In an end-of-year survey we asked accounting and bookkeeping professionals what were there biggest challenges going forward into 2017. Some said ‘Getting more clients’ others said ‘Keeping up with technology changes.’ Really? Surely there is direct relationship between operating purely as a ‘technical’ services provider and running a business, a practice.
Technology solutions abound; this is the threat to old-school practitioners who are not treating their service on a sustainable business model. But based on this year’s results, we are changing.
Every practitioner still wants to keep clients coming in, but now we know that all clients are not created equal, and higher quality clients are important to grow a high quality bookkeeping practice. But this practice looks very different form yesterday’s practice.
Welcome to the subscription economy
Your accounting software provider does it, your telecoms provider does it, and so can a bookkeeping services provider do it: a business strategy must be focused around offering more than compliance work; it is innovative services that breed long-term relationships. So instead of being about single, discrete sales, the Subscription Economy gets down to monetizing and retaining relationships for a predictable recurring revenue. Rather a client proposal being billed at an hourly rate, a practitioner today can minimize the churn and the time spent assessing hours on each job or task by setting up a subscription-based service.
One of the new metrics for this business model is Annual Recurring Revenue, or ARR, is the amount of revenue you expect to repeat. It’s that simple. Note that, this does not include one-time revenue, it only includes revenues that recur. The successful accounting software providers can actually start each fiscal year knowing what their revenues are going to be for that year.
Increasing Your Customer Value
All companies focused on growth have a goal of acquiring new customers. But for your SaaS business, you’ll also strive to establish valuable, meaningful relationships with your customers to increase their value and to retain them over time to minimize churn. It’s a hard reality to swallow, but even if you’ve got the best service offering in the market, you’ll still have customers that will leave you.
So, in your planning for the year you’ll need to subtract your churn from your annual recurring revenue for the year.
One strategy for increasing the value of your customers is implementing a pricing framework offering various editions/level-of-service. This means, a customer can easily move to a higher edition as their needs increase.