The Power of Predictable Income: Monthly Recurring Revenue Explained
In this episode, we explore the concept of Monthly Recurring Revenue (MRR) and its critical importance for businesses, especially regarding exit valuations.
Lani Dickinson, a former Fortune 175 CEO, shares insights on how MRR can stabilize cash flow and increase the lifetime value of customers. Discover the different levels of subscriptions and learn how to implement MRR strategies in your business to enhance growth and achieve financial freedom.
Don't miss this essential guide to making your business more predictable and valuable!
---
Enjoyed this episode?
Subscribe to Freedom to Exit for more insights on building a scalable, sellable business that buyers compete for.
Free Resources to Go Further:
📌 7 Ways AI Can Boost Your Sales and Save You Time – Download this free guide: https://ai.activatetoascend.com/get-7ways-ai
📌 3 Ways Your Business Can Use AI TODAY to Stop Leaking Money – Save your seat for the free live webinar: https://webinar.activatetoascend.com/webinar-register-general
📌 Changes Assessment – Discover where your business is leaking time, money, and momentum: https://stealthfreedomtoexit.com/changes
Connect with Lani Dickinson:
đź“Ś Instagram: https://www.instagram.com/stealthfreedomtoexit
đź“Ś Facebook: https://www.facebook.com/laniadickinson
Need expert guidance on your exit?
Visit https://stealthfreedomtoexit.com
If you got value from this episode, leave a review—it helps more business owners find the show!
Transcript
>> Lani Dickinson: Today we're going to talk about monthly recurring revenue, what it is,
Speaker:how important it is to your business, and how important it is to
Speaker:your exit valuation, which is what we're all here to talk
Speaker:about.
Speaker:Welcome to the Freedom to Exit podcast. I'm Lani
Speaker:Dickinson, former Fortune 175 CEO,
Speaker:bringing you expertise in private equity
Speaker:insights, turnarounds,
Speaker:sustainable growth, and positioning your business
Speaker:for exit. So let's dive in. Monthly recurring revenue
Speaker:is the amount of predictable total
Speaker:revenue that you can track to
Speaker:subscriptions monthly in your business. It's a
Speaker:beautiful thing because you get paid over and over
Speaker:and over again for acquiring the customer one time.
Speaker:Not only does this increase the lifetime value of
Speaker:your customer, which anybody looking at your business is going to
Speaker:wonder what that is, but it
Speaker:also brings you a higher
Speaker:valuation and, it makes your income easier
Speaker:to scale. Imagine starting every single month with
Speaker:all the company bills and your lifestyle
Speaker:bills all covered by the first of month. That's exactly
Speaker:what monthly recurring revenue does for you. And it
Speaker:contributes very heavily to the predictable
Speaker:repeatable sales process that is
Speaker:evaluated in your exit multiple. Gives you predictable
Speaker:cash flow, stable growth, and it signals to
Speaker:the buyer that you truly have good product market
Speaker:fit. In the exit process, you're going to get a
Speaker:minimum of $2 for every dollar that you have
Speaker:in monthly recurring revenue. So this is worth your time to
Speaker:figure out how can I create some monthly recurring
Speaker:revenue in my business? There is also a
Speaker:hierarchy. At the lowest end, it would be
Speaker:considered just a consumable thing like a yogurt
Speaker:card at your local yogurt store or the
Speaker:Panera soda subscription. We can get unlimited
Speaker:refills. Those are ways to get
Speaker:us spending a certain amount of money every
Speaker:month to get some benefit. The next level would
Speaker:be more true subscriptions,
Speaker:like a car wash subscription. You can have so many
Speaker:per month. They're just ways to get you coming
Speaker:and using the product and you get a little bit
Speaker:discounted rate. The next level up would be sunk
Speaker:cost subscription. So sunk cost
Speaker:means we've already spent some money on something like maybe
Speaker:a Keurig machine or an Nespresso machine. There's
Speaker:a consumable piece that we've got to keep buying each
Speaker:month. So that'd be the Keic Pod or the Nespresso Pod.
Speaker:Then there's auto renewal subscriptions. And this
Speaker:is something like your Amazon prime
Speaker:membership, your gym membership. This is something you
Speaker:pay for every month or
Speaker:annually, and it's something that the consumer
Speaker:uses. Then there are contracts. This is
Speaker:the highest level of monthly
Speaker:recurring revenue rating. And this is
Speaker:B2B. So it would be like a business to another business,
Speaker:a business to a government entity, or a business to
Speaker:a retail chain. It's really important as you look
Speaker:at either version of exit, whether
Speaker:that's time and location freedom, or whether that is to truly sell
Speaker:your business and exit. For more, you want to think about
Speaker:how can you add monthly recurring revenue to your
Speaker:business or how can you strengthen the
Speaker:kind of monthly recurring revenue you have in your business if
Speaker:you have it already? If you are a coach, could you
Speaker:add a SAS component or a CRM M component
Speaker:and get people building their business into your
Speaker:CRM M and in your back end so that you have
Speaker:the ongoing revenue? Many alarm monitoring
Speaker:companies actually outsource the install because
Speaker:that's not where they make the money. Where they make the money is the
Speaker:ongoing monthly recurce contract for the
Speaker:monitoring One of the stories I've been most
Speaker:fascinated by was this story of a flower shop.
Speaker:Flower shops are dependent pretty much on Valentine's
Speaker:Day and Mother's Day to make their money, and
Speaker:it's said that they throw away up to 60%
Speaker:of their flowers each month. And this one
Speaker:group said, let's turn this into a subscription. They
Speaker:went to the spas and the home decoration
Speaker:companies and various big offices in the area where
Speaker:they live and they offered them a weekly and every other
Speaker:week subscription where they they would bring them fresh flowers
Speaker:and do all the work for them. Now they only throw out 5% of
Speaker:their flowers and every month they have their bills
Speaker:paid and they've reduced risk, they've stabilized cash
Speaker:flow, and they've proven that the market actually
Speaker:loves their products. So they're no longer dependent on
Speaker:two holidays in the year and they have
Speaker:stable monthly income. If you're finding this helpful, make
Speaker:sure you, like, share and subscribe. And of course, return next
Speaker:week where we dive more fully into this freedom to exit idea.
