Dan Martell - January 14, 2019


How To Increase Your Monthly Recurring Revenue (MRR)


Episode Stats

Length

11 minutes

Words per Minute

190.81541

Word Count

2,259

Sentence Count

98


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

Transcript

Transcript generated with Whisper (turbo).
00:00:00.160 Hey there, I'm Dan Martell, serial entrepreneur, investor
00:00:02.160 and creator of SaaS Academy.
00:00:03.840 In this video, I'm gonna share with you some strategies
00:00:06.640 on increasing your monthly reoccurring revenue
00:00:09.840 so that you can have a huge impact on your ARR,
00:00:12.560 your annual reoccurring revenue.
00:00:14.080 And be sure to stay at the end where I share with you
00:00:16.160 how to get access to my precision scorecard methodology
00:00:19.920 so that you can get clear on your outcomes,
00:00:22.560 measure those backwards and have your team accountable
00:00:25.880 for the right metrics to grow your business.
00:00:30.000 So maybe you're frustrated because you're like,
00:00:43.020 I just need to grow my monthly reoccurring revenue.
00:00:45.680 My MRR is not growing.
00:00:47.080 It's flat.
00:00:47.980 And you want strategies to make this happen.
00:00:50.300 Now, I coach dozens of incredible founders.
00:00:52.800 And one of the first things that I do with them
00:00:54.860 to really have an impact on their business
00:00:57.380 is to tweak these changes to their pricing
00:01:00.880 and then their product.
00:01:01.720 Many founders, when they start off,
00:01:03.980 they're just small and they're getting going
00:01:05.660 and they've got like features and they get a customer
00:01:07.920 and then 10 customers and 100
00:01:09.120 and they're just so friggin pumped that they've got customers
00:01:11.660 that they never revisit how their plans are structured
00:01:14.700 or their pricing or anything to ask themselves,
00:01:17.960 you know, I've obviously created more value
00:01:20.740 for my customers since we started,
00:01:22.440 but nothing's changed when it comes to the pricing
00:01:24.940 or the structure of the way that people enroll.
00:01:27.640 We probably have new customers that are 100 times bigger,
00:01:31.180 and we haven't done anything.
00:01:32.240 And what I want to share with you guys in this video
00:01:34.320 is the six areas that you could be looking at in your business
00:01:37.820 to increase your MRR.
00:01:40.120 Number one, raise prices.
00:01:42.520 Now, I know this sounds so friggin' flippant.
00:01:44.520 You're like, duh, Dan, I could raise my prices.
00:01:46.600 I know that.
00:01:47.560 The truth is, is have you done it?
00:01:49.160 Have you gone through a price increase?
00:01:50.940 You know, recently I was coaching one of my clients,
00:01:53.000 and they were charging $6 a month for a tool
00:01:56.840 that literally ran their customer's business.
00:02:00.240 And I asked them, why have you ever changed your pricing?
00:02:03.440 And they were worried that they would lose
00:02:05.340 a bunch of customers.
00:02:06.180 But if you just think about it, it's pure economics.
00:02:08.640 If I take my pricing and I potentially change it,
00:02:11.920 and this is really simple, you just look at the market,
00:02:14.060 you know, what's a competitive set look like?
00:02:15.560 You're at six bucks, you know, you can go to 25
00:02:17.800 and it's not a crazy number, but you 4X the pricing.
00:02:21.700 Let's just say, worst case, you lose, maybe,
00:02:25.100 in my experience, not as much.
00:02:26.880 You lose 10 to 15% of your customers.
00:02:28.940 You've gone up 4X and you've only lost
00:02:32.240 10 to 15% of your customers.
00:02:33.620 So net, net, you are way further ahead.
00:02:36.380 And the main reason is you need to do this
00:02:38.220 is so that you can invest in innovation.
00:02:40.280 You can invest in your team.
00:02:41.780 You can actually build a lifestyle
00:02:43.960 that supports the business so that you don't want
00:02:45.700 to just sell it every six months
00:02:47.200 because you're just not having a good time.
00:02:48.700 So number one, make sure you raise your prices.
00:02:51.260 Number two, ditch the free plan.
00:02:53.620 Many founders start off by offering free because they just
00:02:57.060 want anybody, anybody, please use my product.
00:03:00.400 So they make it really easy.
00:03:01.700 There's no friction, you can just sign up,
00:03:03.080 you can use it, it's for free.
00:03:04.380 The challenge is they don't set any limits, any trial extent,
00:03:08.280 like any cut-offs to that free plan so that people just keep
00:03:12.520 using it and using it and they're using server resources
00:03:15.460 or they're hitting up support.
00:03:17.680 And yes, you could argue that this is a marketing thing but I'm
00:03:20.520 going to tell you, most of the founders that I coach are
00:03:22.960 bootstrapped founders and at the end of the day, they're
00:03:25.400 investing personally their time in support, OK?
00:03:28.560 They're answering their 1-800 number,
00:03:30.320 going right to their cell phone.
00:03:32.060 And I don't know about you, but if I've got people that are
00:03:34.940 asking me for my support, I want to know that we're aligned.
00:03:37.760 And the best way to do that is get rid of the free plan,
00:03:40.640 go straight to a paid, maybe do a free trial,
00:03:42.700 no credit card on file if you want.
00:03:44.220 I prefer a credit card on file.
00:03:46.020 And then that way, you know that when you're serving your
00:03:48.540 customer and you're activating your work,
00:03:49.880 making sure they get the most of their trial,
00:03:51.840 that there's a high likelihood
00:03:53.360 they'll become a paying customer.
00:03:55.460 Number three, unbundle the features.
00:03:58.780 There's a very good chance that you kept adding
00:04:01.220 and stacking and stacking and people ask for new requests
00:04:03.960 and you just kept adding new features.
00:04:05.860 That right now when you look at your plans,
00:04:09.060 for the most part, it could be,
00:04:10.300 I've seen this happen very often,
00:04:11.900 that it's just one plan with a bunch of stuff.
00:04:14.380 You need to look at unbundling them
00:04:16.500 and really asking yourself,
00:04:18.040 What does a customer at this stage of this size,
00:04:21.620 of this industry, you know, look like?
00:04:24.220 And what do they need to be successful without, you know,
00:04:27.020 giving them too much?
00:04:28.020 And what does the next stage look like?
00:04:29.880 So just by unbundling, it's gonna have a huge impact
00:04:34.560 in your business.
00:04:35.400 And the cool part is you could even look at adding add-ons.
00:04:40.300 So taking something, for example, like a QuickBooks Sync
00:04:43.240 or maybe some kind of like other integration that's native,
00:04:46.260 Not a Zapier connection but something native to your
00:04:48.600 solution and having that as an add-on so that you can get an
00:04:51.900 extra $20 a month per customer that needs that but know that,
00:04:55.340 hey, that's probably an enterprise customer so you can
00:04:58.500 price it accordingly but if somebody's at the lower end and
00:05:01.140 they really want it even though they don't need as many seats,
00:05:03.580 they can have the lower end plan but have that add-on.
00:05:05.940 So unbundling features are a great opportunity to increase
00:05:08.980 your monthly reoccurring revenue.
00:05:10.760 Number four, removing unlimited features.
00:05:14.160 This is probably the biggest bane to revenue opportunity to
00:05:19.560 most startup founders is having a value driver, some kind of,
00:05:26.400 you know, it could be the number of accounts.
00:05:28.240 One of my clients recently moved from a all-you-could-eat
00:05:32.440 unlimited accounts underneath their different plans to a per
00:05:35.520 seat pricing.
00:05:36.280 The reason why is when they went to the market and did the
00:05:39.420 research, they hired an incredible company to come in
00:05:42.480 and do that research.
00:05:43.360 They found that they would prefer to buy under that
00:05:46.320 mechanism because it allows it to be more predictable in
00:05:48.740 regards to their cost structure.
00:05:50.260 So even though they were trying to be this like altruistic,
00:05:53.500 hey, there's three different plans and we're not going to
00:05:55.640 ever restrict you on a specific number of accounts that you have
00:06:00.240 on our products, we just want you to be successful.
00:06:01.780 It was actually against what the customers,
00:06:04.120 how they expected to buy that kind of solution.
00:06:07.020 So actually removing unlimited and making it structured so
00:06:11.280 There's a number of accounts per different plan.
00:06:14.680 This is, I mean, I've seen this with companies like Wistia,
00:06:17.820 with the number of videos.
00:06:20.520 You can do it on other data points.
00:06:22.860 It's really whatever, when you look at your customer's usage,
00:06:25.660 okay, amongst all your customers,
00:06:27.600 there's probably really clear breakdowns where somebody
00:06:30.460 transitions from this level activity to the next tier of
00:06:34.780 activity and that's where you want to start adding some
00:06:37.700 constraints in the upper end of their usage that kind of forces
00:06:40.980 them into the next plan that you might offer.
00:06:43.940 So make sure that you remove unlimited features if that makes
00:06:46.720 sense.
00:06:47.420 Number five, move up market.
00:06:49.960 It is very rare that I've seen companies that start at the
00:06:53.700 enterprise level move to mid-market or even less rare that
00:06:58.100 somebody's at a mid-market level and moves down to SMB.
00:07:01.360 What typically happens is when a product starts your start at the
00:07:04.640 SMB, the small medium business level because you don't have the
00:07:07.400 feature set to really serve a mid-market customers.
00:07:09.880 but over the years, over a two, three, four,
00:07:12.220 five-year period, you'll probably get some of these
00:07:15.160 medium-sized companies come into your product
00:07:17.280 and ask you for some features and you build them
00:07:19.960 and then all of a sudden you realize that,
00:07:21.260 hey, maybe five to 10% of our customer base
00:07:23.660 are actually mid-market customers,
00:07:25.500 but yet all of your marketing, all of your packaging,
00:07:27.860 all of your plans and your support
00:07:29.860 is really still just selling and serving
00:07:32.040 to an SMB customers, moving up market,
00:07:35.040 making a deliberate decision to say,
00:07:37.840 you know what, we're gonna kind of like, not get rid of,
00:07:41.880 but just kind of hide the smaller plan,
00:07:44.320 move more to mid-market, change our marketing,
00:07:46.920 change our positioning, change our pricing structure,
00:07:49.860 change our sales and our essentially our go-to-market
00:07:52.960 strategy for that mid-market customer.
00:07:55.360 Maybe start building an outbound sales team
00:07:57.660 to target those key accounts that we want.
00:07:59.800 That's how you move up market.
00:08:01.960 And what's great about it is the larger the customer,
00:08:04.300 the churn number comes down,
00:08:06.040 the annual contract value for an account goes up
00:08:11.080 and your MRR goes through the roof.
00:08:13.020 So just moving up market is such a natural way.
00:08:16.260 If you've been in the market for three to five years,
00:08:19.320 you've probably already got those customers and just waiting
00:08:21.720 for you to move up and start adding and focusing
00:08:25.160 on them as a segment.
00:08:26.960 Number six, maximize upselling.
00:08:30.140 So I call this farming.
00:08:31.500 There are so many opportunities in your product for you to look
00:08:35.240 at activities that happen from an account point of view
00:08:38.640 and offer expansion revenue opportunity,
00:08:41.520 meaning that there's some feature that they might hit a limit
00:08:44.620 or they're on their way to hitting a limit
00:08:46.020 and then you could be like, hey, Joanne,
00:08:47.980 I noticed that you guys have already used four
00:08:50.080 out of your five accounts.
00:08:51.860 Let me know if you want to discuss about moving
00:08:53.800 to our next plan because all of a sudden
00:08:55.300 the per account pricing gets cheaper
00:08:56.860 and you also get these extra benefits.
00:08:58.500 So actually getting really good at notifications for you,
00:09:02.200 for your customer success team
00:09:03.740 to identify opportunities for upselling,
00:09:06.380 other add-ons, other plans to your existing customers
00:09:09.420 is a really low-hanging fruit for anybody
00:09:12.680 to expand their monthly reoccurring revenue
00:09:14.720 by just offering it.
00:09:15.820 Most people don't even know they've come up
00:09:18.820 or they might be hitting these new levels,
00:09:20.860 and they just need somebody to talk to.
00:09:22.700 And you can be that person.
00:09:23.700 You just gotta reach out, chat with them,
00:09:25.760 and get them excited about that next level of support,
00:09:28.340 next level of implementation,
00:09:30.360 of value that you're gonna unlock in your product
00:09:33.740 and those integrations, those add-ons and get them on board.
00:09:36.340 But you need to learn how to maximize your upselling.
00:09:38.920 So six simple tweaks you can make to really increase your MRR.
00:09:43.080 Number one, raise prices.
00:09:44.920 This is a no-brainer.
00:09:45.920 You've added more value.
00:09:47.320 You should be capturing more value in your pricing structure.
00:09:50.860 Two, ditch the free plan.
00:09:52.960 Get people that want your support that are going to use your
00:09:55.500 product to pay you for it.
00:09:56.860 They're going to value it more.
00:09:58.260 Three, unbundle the features.
00:10:00.800 There are things that you're offering that should definitely
00:10:03.460 be standalone, potentially as an add-on that people could buy
00:10:07.060 on another monthly basis.
00:10:08.640 Number four, remove unlimited features.
00:10:11.560 There is a value pricing axis that should be understood and
00:10:15.780 your unlimited features is holding you back from allowing
00:10:18.700 customers to move up the value chain in your plans.
00:10:21.820 Number five, move up market.
00:10:24.340 When you started, you were probably serving an SMB
00:10:26.720 customer or mid-market.
00:10:27.780 It is time to move up market to capture higher annual contract
00:10:31.820 values, have lower churn, and overall allow for increased
00:10:35.860 expansion revenue.
00:10:36.760 And number six, maximize your upselling.
00:10:39.400 Become great at identifying those opportunities that customers
00:10:42.860 would naturally want to have a conversation about moving to the
00:10:45.900 next level of service with your product.
00:10:48.640 As I mentioned in this video, I want to share with you an
00:10:50.640 exclusive resource called the Precision Scorecard.
00:10:53.800 It's a framework I created to allow my clients to get clear on
00:10:57.280 not only their targets but their actuals on a monthly and a
00:11:00.780 weekly basis and in it, you can click the link below to
00:11:03.920 download your copy, I provide the metrics for below a million
00:11:08.620 in ARR and above a million so that you can just map those to
00:11:13.060 the funnel structure that I offer in that format to get
00:11:16.560 clear to hold your team accountable for the specific
00:11:20.200 numbers that they should be hitting on a weekly basis that's
00:11:22.700 gonna map up to their monthly targets and eventually hit your
00:11:25.980 quarterly goals.
00:11:27.440 You can click the link below to download your precision
00:11:29.440 scorecard and if you like this video, smash that like button.
00:11:33.420 Be sure to subscribe to my channel and if there's anybody
00:11:35.720 you care about that you feel I could serve, feel free to share
00:11:37.920 this video with them.
00:11:39.380 As per usual, I want to challenge you to live a bigger
00:11:41.120 life and a bigger business and I'll see you next Monday.
00:11:44.160 Is the money shot state of the end?
00:11:47.560 Dun, dun, dun, dun, dun, dun.