How important is cash flow to your integration business?
A blog post based upon The AV Profession podcast from AV Nation.
Most integrators agree that having a backbone of solid cash flow is the lifeblood of an integration business. There has been a lot of discussion in the industry, that developing monthly recurring revenue is one of the best ways to achieve this.
Monthly recurring revenue creates predictable cash flow. On this episode of The AV Profession, Tim Albright and Steve Riley of Navigate Management Consulting, discuss all this and much more.
As a benchmark, Navigate recommends integrators set a target of 10 percent of overall annual revenue to be recurring, or come from support agreements.
“The key is contract renewals – the renewals are what you want,” says Riley. “You have to be able to execute on these contracts as be able to provide value.”
“We go into companies and help them build their service departments. Often, we are seeing services revenues of 1 or 2 percent of total revenue. So, setting a target of 10 percent is a big number to start off with for a lot of integrators. But eventually, that services target could go up to 20 or 30 percent. This is very achievable.”
Integrators also need to define their services offering and decide how to obtain that recurring revenue.
“Is that recurring revenue going to come in the form of AV-as-a-Service, which we have been hearing a lot about recently,” asks Riley. “Or is it going to come in the form of a service contract, or a support contract? You need to decide what that service offering is going to look like and what the offering is going to be.”
Listen to the podcast to learn how to create predictable cash flow with MRR:
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