BLOG
Recurring Revenue Rate
Recurring Revenue Rate provides an indication of how much recurring relationship value you are retaining, growing or losing. It’s a crucial metric of how well your Support organization is reaping the benefits of the subscription model. Here’s how to calculate recurring revenue rate.
What is Recurring Revenue Rate?
Recurring Revenue Rate indicates the percent change in the amount of recurring recurring revenue at the end of a specified period compared with the recurring revenue at the beginning of the same period.
Support and Success leaders can apply recurring revenue rate to a specific timeframe (e.g. quarterly or annually), or to tracking Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR). It’s an essential metric of the financial health of recurring revenue relationships such as service contracts and subscriptions.
(An important note: Unlike Contract Renewal Rate, where 100% is the maximum performance level, recurring revenue rate can exceed 100% — indicating that the value of an existing relationship, or the net value of all recurring relationships, has increase from the previous period.)
How to calculate Recurring Revenue Rate
The formula is a simple ratio:
Recurring Revenue Rate = Recurring Revenue at End of Term / Recurring Revenue at Beginning of Term
Let’s apply it to a very basic example, calculating the recurring revenue rate for Q1:
Recurring Revenue Beginning Q1 = $100
+ Recurring Revenue Added in Q1 = $50 ($45 from new customers + $5 from expansion of existing relationships)
– Recurring Revenue Lost in Q1 = $30 ($25 due to customer churn + $5 due to downgrade of existing relationships)
Recurring Revenue End Q1 = $120
Recurring Revenue Rate = 120% (20% growth)
How effectively are you managing and maximizing recurring revenue?
I’m here to help you get the answers you need.
Reach out anytime to get answers and insights about the best ways to engage and retain your customers. Use the chat button at bottom right, send an e-mail, or click on my calendar to schedule a time to talk.
New, high-return revenue streams are waiting to be unlocked.
Here’s the key.
Exclusive ServiceXRG Whitepaper:
Using Services to Retain & Grow Recurring Revenue
Related Articles
The Right Metrics for Support and Success
This article introduces 8 essential metrics for Support and Customer Success.
Ten Strategies to Build Customer Proficiency
Higher levels of customer proficiency lead to faster product adoption and less need for support assistance. Leverage these 10 strategies will help customers develop essential product skills.
Eight Strategies for Keeping in Touch with Customers
Healthy customer relationships require an ongoing dialogue through digital media, self-help, communities and direct interaction with Support and Customer Success team members. This article introduces eight customer interaction best practices to engage and retain your customers.
Six Steps to Effective Customer Success Planning
Planning for customer success starts with establishing how your customers define success with your products. By understanding what your customers expect it is possible to align resources to help customers achieve their desired outcomes. Six steps to effective Customer Success planning practices to engage and retain your customers.
Five Customer Engagement Best Practices to Develop, Retain, and Grow Relationships
Customer engagement is vital to long term positive relationships with customers. This article introduces the five essential customer engagement practices necessary to develop, retain and grow customer relationships.
Three Critical Metrics to Retain and Grow Customer Relationship Value
You have a lot of customer data, but does it tell you everything you need to know about how to engage and sustain long term profitable relationships? ServiceXRG CEO Tom Sweeny explains his three critical customer relationship value metrics — why they matter, how to calculate them.
