Numbers Don’t Lie, Get Your Data Renewal Ready
Written by – Jay Ackerman, Chief Renewals Officer & EVP Customer Success
Before you set off on your path to increasing recurring revenue through renewals and subscriptions, you need a firm understanding of where you stand. Our research shows that perception often doesn’t mirror reality – companies overestimate their renewal rates and underestimate their revenue potential.
Recurring revenue is critical to your bottom line.
WANT TO BUILD A FINANCIAL EMPIRE?
Subscribe to the Global Banking & Finance Review Newsletter for FREE Get Access to Exclusive Reports to Save Time & Money
By using this form you agree with the storage and handling of your data by this website. We Will Not Spam, Rent, or Sell Your Information.
The most important fact to grasp is this: recurring revenue is critical to your bottom line. And it’s a great place to make a real difference in your overall profits. Consider:
- According to the Technical Services Industry Association, recurring revenue is growing at 8 percent a year – faster than the 6 percent a year growth in new revenue.
- It compounds year over year. If you increase recurring revenues by $1 million this year, that’s a compounding benefit for years going forward.
You’re not as good at it as you think, or as you should be.
We’ve found that many businesses overestimate their renewal rates by 10-20 percent. This can happen if you’re not carefully tracking the differences between:
- How many customers you get a yes or no answer from (decision rate)
- How many of those customers actually renew (close rate)
- How much revenue you actually book, including cross-selling and up-selling (conversion rate)
Many businesses take the decision rate at face value. That can be a real problem if your close rate isn’t good. And if you don’t optimize the conversion rate, you’re sacrificing a significant source of ongoing revenue.
You may not understand the real opportunity
At the same time, some companies don’t realize the size of the opportunity that they have in recurring revenue. When we started with one of our customers, data about renewals was spread across multiple different systems – limiting visibility into the actual opportunity. We found that the real opportunity was more than five times larger than their top-end estimate. So, start by taking a good hard look at what you’re doing now – what’s the role of recurring revenue on your bottom line? Do you even know the actual revenue opportunity to your company in renewals? What would the three-year impact be if you improved the true renewal rate by 10% or more a year?
Once you can answer these questions, you can get the backing to start driving the next steps.
Here’s the next big secret to improving your renewal revenues – make sure you’ve got ‘renewal-ready’ data.
Does this seem obvious? According to our research, renewal salespeople spend less than 40 percent of their time actually selling. They’re busy aggregating and consolidating the data they need to make a sale. However, our research shows that companies that clean up their data issues and implement role specialization saw sales reps productivity double. We saw a large data storage company increase sales productivity from 40% to roughly 80% in just six months.
Improve the renewal data and you’ll improve your renewal rates.
Of course, getting ‘renewal-ready’ data can be a challenge. Renewals are generally an ‘afterthought’ in the designs of purchasing and customer systems. As a result, the data you need for renewals is typically fragmented, inconsistent, and out of date.
Multiple source systems
Renewal data comes from between five and seven different systems on average – and that number can be much higher. Often, these systems don’t communicate with each other easily or flounders within the massive gap between CRM and ERP applications – leaving the burdensome administrative work for the salespeople. In one business we’ve worked with, people manually extracted data from scanned PDFs. This is obviously not a good use of your sales talent.
Lack of standards
In multinational organizations, different regions, countries or channel partners often report necessary data differently. Unless you aggregate and normalize that data, you cannot get a global view of the opportunity or track your performance.
Mergers and acquisitions compound the problems above, as different acquired business units do business with their own various sets of data sources. Without knowing the true renewal opportunity of the integrated organization, you cannot forecast accurately, you cannot drive standard practices and you are bound to miss opportunities.
Ultimately, companies should focus on three key areas when prepping their data for renewal readiness:
- The Source: Are you able to consolidate the data from multiple sources? These can include CRM, ERP, billing, asset management and other systems.
- The Quality: Is the data complete and reliable? For example, many companies have problems managing data for hardware assets as they are moved or decommissioned from production environments. Similarly, managers responsible for IT support often move jobs – which makes the renewal process challenging without an appropriate point of contact.
- The Quantity: Your company is awash in customer data spanning multiple different systems. As you connect the dots between your different systems, how can you ensure that you’re only utilizing the data necessary to complete the renewals process without placing additional burdens on existing systems and resources?
To know more download the ebook “Recurring Revenue: Five Secrets to Fly High and Fuel Growth.”
PROFILE OF JAY ACKERMAN, CHIEF RENEWALS OFFICER & EVP CUSTOMER SUCCESS
As Chief Renewals Officer & EVP Customer Success, Jay is responsible for leading ServiceSource’s global customer lifecycle management approach and methodologies, ensuring that the voice of the customer is ever present and our offering is always relevant. He is also leading our recently launched Service Executive Industry Board. Prior to ServiceSource, Jay held senior positions with several successful high-growth outsourcing companies. He served as CEO and President of WNS North America. Under his leadership, North American revenue for WNS grew from $6 million to $55 million in just 24 months. In addition, Jay was a senior leader at Exult, the market innovator for HR-led business process outsourcing services an organization that grew to $500m in revenue in 5 years. Throughout his career, Jay has built a reputation for developing strong customer relationships and consistently delivering against challenging customer requirements. Jay is a CPA in the State of New York. He received an MBA in Finance from the Stern School of Business at New York University and received a BA degree in Economics from Connecticut College.