Why would you let as much as one-third of your revenue walk out the door every year? And knowing it will, why include it in your forecast, and consider it a “success” as long as it’s no more than one-third?
This is exactly what many companies with subscription-based business models are doing.
The move to subscription-based business models has accelerated in the past decade, led by technology-services companies moving to cloud-based offerings. Most companies that have made this shift have benefited from having a recurring revenue stream and the ability (generally) for more automated sign-up and service options for prospects and customers.
But we missed something.
Recurring revenue means it’s critical to ensure that customers who walk in the front door this year don’t walk out the back door next year. Put another way, it means the value of renewing your customer’s subscription is just as high as starting the subscription in the first place.
A few of you who are doing this right may take exception to this, but in most of the organizations with which I’ve worked, the effort devoted to renewing customer subscriptions is not even close to the effort put into acquiring the customer in the first place. Ask yourself this: In your organization, how much of your budget and staff are devoted to ensuring customers renew? I’ll bet you’ll be surprised at the answer.