By: Sean Joyce, CTO, Navint
Many B2B businesses are currently evaluating how to shift from a one-time transaction to a recurring revenue model, which commonly includes both subscription and consumption-based models. While companies in the B2C world may be able to navigate this change through fixed fees and an “all-you-can-use” pricing structure, enterprise customers require far more flexibility, transparency and customization.
Recurring revenue models are an ideal way for businesses to drive revenue while also improving the overall customer experience. But it’s not just like flipping a switch; there’s a lot consider before your business shifts to a usage-based model? To start, consider these three critical factors before you begin your project:
- Take a data-first approach
Usage data – which tells you how your products and services are used – is useful for much more than billing. It’s the core of all digital services. When combined with an effective strategy and proper tooling, companies can use usage data to determine how to structure new quotes or payment tiers, scale revenues, and optimize existing services to meet the needs of your quote-to-cash process.”
Be sure to carefully analyze usage data and tap that information to make decisions about where to take the product. Understanding how your customers use your services and being able to react to that data in real-time is critical.
Companies often mistakenly focus on data at the application level, which creates a lot of manual work down the road when teams need to stitch together different data streams to create a holistic view across the entire lead-to-revenue lifecycle. Instead, it’s imperative to take a data-first approach across all applications. Recurring revenue models are complex. It’s not just about finding the data components; it’s about putting the data set together so that it can interact with all your different applications on top.
Make sure you have the right platform that can take your usage data and different buckets of data that you can use in multiple ways. Remember, having data is great – but you need to be able to process it in a way that will add value to the business, across all functions.
- Build with flexibility in mind
Its’ not enough to build your system to support the way you sell and bill today. You need to consider how it will enable the business models of tomorrow. This means that the systems created today must be able to accommodate new ways of bundling, usage models or tiers in the future.
Everything comes back to flexibility: flexibility in the way you sell and the way you monetize when you bring products to market. The only way to really achieve that flexibility is to design a technology stack that is united across Sales, Finance and Operations. So be bold when you build your solution, and your business will be able to adjust and pivot to changing customer demand.
- Take an end-to-end approach
If you want a flexible foundation that lets you build and launch future business models, you must take a holistic view of your lead-to-revenue architecture. This may seem like an obvious step, but many businesses miss it, the process of unifying the Sales and Finance team.
It’s common in a traditional business model to think of Sales and Finance as two distinct, even standalone, business functions. But it’s impossible to successfully deploy a recurring revenue or usage-based model fi these functions aren’t unified. If the business wants to sell in a flexible way, then it also must be able to bill, account and recognize that revenue.
It’s crucial to bring your Sales and Finance teams together at the beginning of your project to plan, build and operate a unified lead-to-revenue architecture that’s purpose-built for you, and can handle existing requirements – and support future needs. Then, develop a comprehensive and holistic data strategy that considers usage data across all applications. And be certain to engage a partner that understands the full lead-to-revenue process and vendor and technology landscape. Follow these steps and you’ll be on your way to reaping the full benefits of a usage based model.