Monthly Recurring Revenue (MRR)

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MRR is the gold standard of agency revenue. The reason for that is it’s predictable. It’s the company version of getting a paycheck. You can plan because you know how much is going to be in the bank account every month. That’s super important. When you work strictly on performance or project it’s hard to look at a prospective employee and say, “Yeah, I can pay you $75,000” when you don’t know what your budget is going to look like in six months.

MRR gives you security. It gives you a solid base to work from. I’m a big fan of layering in other kinds of revenue, a little bit of performance revenue or some project work here and there, but for most agencies MRR is the best bet. It has the right amount of risk reward. You can certainly make more money by being strictly performance, but the risk reward profile there isn’t quite as good because if you miss your targets, you have no cash.

Create more MRR by thinking about your service from the customer viewpoint. What can you do every month that provides ongoing value? Understand that the activities you do aren’t inherently valuable to the client. It is the outcome of those activities that matters.

A key to increasing MRR is having a set of activities that you engage in regularly that are directly tied to an outcome. Effort doesn’t really count. It is much more about you having a process that you follow that generates a result for the client. That is what they’re paying for. The best way to increase your MRR is to think about your service from the customer’s viewpoint, and ensure that you’re giving something of value to them every month.

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