How Can Recurring Revenue Transform Your Business?
In the expertise space, project windfalls are typically the norm. But transacting your services in this way has all kinds of implications on your business, from marketing and sales to the experience your clients have with you over the long haul.
In this episode of Expert Marketing Matters, Mark, Chris, and Lauren discuss the importance of recurring revenue, and how to begin to evolve your service offerings to better generate it…
You can listen to the episode using the player embedded above, or you can read a full transcript below.
Chris Butler: Welcome to Expert Marketing Matters. I’m Chris Butler.
Lauren McGaha: I’m Lauren McGaha.
Mark O’Brien: And I’m Mark O’Brien.
Chris Butler: So.
Mark O’Brien: Recurring revenue.
Chris Butler: So yeah, recurring revenue. We wanted to talk about how to make money better, more.
Lauren McGaha: Longer.
Chris Butler: Longer.
Mark O’Brien: More reliable.
Chris Butler: Better, faster, reliably.
Mark O’Brien: Reliably, yeah.
Chris Butler: Yeah.
Mark O’Brien: So should we just start with a story?
Chris Butler: Well, sure. Just to connect it to listeners, though, I think this is the natural extension of the conversation that we had last time, which was about productization. And I think as soon as you start thinking about what you do for clients, how you articulate that, how you make it more viable, and you start thinking about productization, you start thinking about completely different models for how to charge for that work. I think a lot of people listening who are typically in the service side of things might charge for product engagements, they don’t think about long-term recurring revenue, how that might affect their cash flow, how that might affect their client’s cash flow.
Mark O’Brien: Right, right.
Chris Butler: So yeah, let’s hear the story.
Mark O’Brien: Yeah, and again, just to set the stage a little bit, the primary thing every prospect I speak with wants is more stability. The main reason they’re getting in touch with us is because they are sick of the peaks and valleys of their pipeline. Like, okay, it’s overflowing today, and tomorrow’s [inaudible 00:01:41] empty, and it’s harrowing both ways because if it’s overflowing they’re freaked out about staffing, and when it’s empty they’re freaked out about staffing.
Lauren McGaha: Sure.
Mark O’Brien: Just on the opposite side. And so consistency is really what everyone’s going for. Stability, predictability, and recurring revenue is clearly from our perspective the best way of achieving that. What really sent that message home to us was eight years ago when we finally had the great recession catch up with us. So we got through 2008 and 2009 without any problems, really, and I mistakenly thought, “Maybe we just dodged it.” For whatever reason, didn’t really understand why, but then 2010, the first two months, January and February, it was I think we sold $11,000.00 in January and $13,000.00 in February. It was like right around there.
Chris Butler: No new projects.
Mark O’Brien: No new projects.
Chris Butler: As I recall, it was just maintenance work.
Mark O’Brien: Because our average project, we were doing websites then, our average project then was like 70-ish K, 60-100K was our range for web projects. So yeah, 11K and 13K, it was very, very scary. And that was before we had gotten serious about following [inaudible 00:02:43] metrics, so we weren’t very well utilized, our payroll [inaudible 00:02:45] were way out of wack, profit wasn’t where it was supposed to be, so we weren’t healthy going into it, right? Didn’t have a whole backlog of savings built up, so we weren’t very well-positioned from a business perspective.
Chris Butler: Well, right, if I can add a little detail to that that I think is helpful to back that up. We had spent the prior year and a half trying to achieve those metrics that David recommended. And we had done everything that we thought was necessary to do, except for one thing, which was address being overstaffed for the services that we were selling and what we were being asked to do, what the market actually wanted.
And so the pattern that we had seen month in and month out was good month, bad month, good month, bad month. Good month meaning exceeding or meeting a certain sales goal, typically a project or two. A bad month being one or less, or nothing, a smattering of maintenance. All of a sudden we had two bad months back to back, and not just bad from a sales of new projects standpoint, but those maintenance numbers weren’t good, either, at the time.
Mark O’Brien: No, no.
Chris Butler: They were a quarter of half of what we were looking to get.
Mark O’Brien: Right. Our goal was, I think, 130K a month in new booked revenue, and so to have 10K basically two months in a row was a really big problem.
Chris Butler: Right, so that immediately became clear, like okay, we have too many people. We can’t afford those people. You were going to get to this layoff component, but it’s not like we ballooned back up immediately afterwards as soon as we got money again. We were forced to realize who we needed, what we needed people to do, and that got us closer to the two metrics that we were shooting for, the payroll percentage, and the utilization metric.
Mark O’Brien: Yeah, it’s funny, your perspective on it. Mine’s a little bit different. In my mind, [inaudible 00:04:35] okay, we’ve been working towards these numbers for years now, right, because you started [inaudible 00:04:39] in ’08 to start to really move that needle, and we were. We were getting better.
Chris Butler: But not fast enough.
Mark O’Brien: But yeah, and we’re like, okay, someday we’ll get there. And up until we had an emergency we treated it as like, okay, that’s a nice to have, and we’re getting there, but not a must-have. It’s like big-picture goal, right? But then it became, okay, this is a must-have because this thing could go out of business, right? And prior to that, prior to January of 2010, I never really thought it could.
You know, I started at Newfangled as an intern, and just always felt safe inside of Newfangled, and didn’t realize it but had just always kind of assumed it was immortal. And then realized that it was, okay, very much not. And by that point I had started buying it, and I was a year into that purchase process, and so the stakes were very, very, very high. Failure was massive failure across the board for everybody, right?
Chris Butler: Yeah.
Mark O’Brien: So yeah, we had to figure out, okay, in order to be in line with these metrics what does Newfangled need to look like? So I was looking at it from like, okay, in order to be properly utilized, and have the right payroll percentage, and everything else, what does Newfangled look like in terms of you got the employee count and everything else.
And then the first thing you have to [inaudible 00:05:51] answer the [inaudible 00:05:54] question is, well, what revenue can we rely on? Okay, we just had two terrible months. Is that the future? I need to base on 10K a month in sales total, or what? And that was difficult to do because we had seen a lot of businesses go out of business by that point, and it was a very, very shaky time across the economy.
And the one thing that really helped us decide, okay, we’ve got a foothold here, was the recurring revenue. We knew at that point that we had like 24K a month in recurring revenue that was really quite stable, and that came from hosting the websites we built, and also from this total [inaudible 00:06:33] support service. I think we might [inaudible 00:06:35] call it something different then, but it was that, or-
Lauren McGaha: I think that was it, the TMS service.
Mark O’Brien: It was called TMS then?
Chris Butler: Total management [inaudible 00:06:40].
Mark O’Brien: It had a few different names, okay yeah. So in 2010 so we had our clients, and it had been a large number of clients paying a small amount of money each month, and that built up to a large amount of money, which was 24K, which was double what we had sold in the previous two months. And so we said, “Okay, we got that. We can count on that, and it’s reasonable to get another 80K a month.” All the metrics were based on the idea that [inaudible 00:07:10] of selling … having 100K in revenue come in, total, right. And that made us able to make some really good decisions that ended up being the right decisions, and it gave us a great deal of stability, and hope, and all the rest. But that convinced me that, okay, recurring revenue is something that needs to be a [inaudible 00:07:32] angle for us, and the goal was to get up to 75% recurring revenue.
Chris Butler: Right, to basically invert it.
Mark O’Brien: Right, invert it.
Chris Butler: To go from 75% month in, month out, new project sales, to the opposite.
Mark O’Brien: The opposite, right, right, right. But that’s just a little story about why recurring revenue is so important in addition to making you feel better and everything else. When things get tough that is more reliable. And I remember having a conversation with [inaudible 00:07:55] who I was pretty close with at the time and talking about that, and he said, “God, I would have killed to have that, to know I could count on that money coming in, because I’m always terrified that the jobs could get canceled at any moment, and I’ve got zero income starting tomorrow.” And I was just really grateful that we had that.
Chris Butler: Also, from my perspective, and I think you’re right that we think about these things in very different ways. I was always thinking operationally. And so decoupling how we get money from what we do in terms of benchmarking projects or identifying milestones was really critical, because prior to that we would get a huge windfall at the beginning, a sales windfall, we’d be in debt to the client until we reached a certain milestone, we’d get our second windfall, and then we had arbitrarily broken it up into three tiers, and then until the project launched we’d be on the hook to get that last bit, which meant basically if a client delayed we had no power. And now with recurring revenue it’s healthier in terms of month in, month out, measuring how you get your money and what you do with it and how far out you can project financial health, but also decouples all of your receivables from project milestones, and it means that delays are no longer as costly in the same way. It doesn’t mean that they’re not costly anymore, but it’s a very different picture.
Lauren McGaha: Yeah, I think it can be kind of a scary thing for agencies [inaudible 00:09:15] who … because I think the value of recurring revenue is undeniable, and a lot of the firms that we talk to are very interested in getting into it, but I think it’s kind of scary because in a lot of ways these businesses have been built around the project model. And so to get into recurring revenue, in earnest, it means taking a step back and looking really objectively at how your business is managed, and then making some kind of scary decisions to reorganize, or rework, the way that you offer your services so that the recurring revenue makes sense to the potential client.
Chris Butler: I’m glad you mentioned that, because I was going to … my question is, all right, so what are we talking about here? If we’re talking about a project model where we identify a price for an engagement, or a project, and we’re talking about making a recurring revenue product or model, we’re not talking about like a subscription model, right? What are we talking about here in terms of how this practically would work for somebody?
Mark O’Brien: Well, I think to get to that I’m going to take a roundabout way to answer that, because the other side of this recurring income is the impact, right?
Chris Butler: Yeah.
Mark O’Brien: Rewinding, again, back [inaudible 00:10:14] 2010, we had the recurring revenue because far before that our goal wasn’t to increase recurring revenue per se, although it’s definitely part of it for sure, but we realized that our clients aren’t doing a great job at using some of the tools they’ve got. And we can help coach them, and if we coach them then they’ll have better results, and everyone’s happy, right? And so it started from that, and that’s still very much true today.
Now, everything we do is built around that. That’s why we run in one-year programs, because we create the strategy, we create the technology in the first four months, but then the latter eight months are all about instilling those habits. It’s all coaching. And without those eight months of coaching the habit doesn’t happen, and without the habit there’s no value. Nothing’s going to actually change inside the firm, and I think that’s very true for Newfangled, but I think that same dynamic is also in play for many, many [inaudible 00:11:07] servicing firms out there who are truly selling their expertise, right? And they do the initial engagement. I think there are far more opportunities for ongoing relationships that maximize the impact our clients would be able to have on their clients than they’re considering now.
And so a recurring revenue isn’t just about getting paid each month, it’s about having a much deeper impact because of it. And so that’s what we’re talking about. Talking about ongoing services that allow you, mostly through consulting … This is not like a retainer. This is not like, okay, you get X bundle of hours a month. It’s not that. That’s not the kind of recurring revenue we’re talking about. We’re talking about an agreement where you’ve done the initial project, whatever that might be, be it consulting or design, whatever it is, and then you have something that keeps the relationship going for six months to many, many years. Three to five years, maybe, after that where you’re getting paid a regular amount and you’re having a regular influence.
Lauren McGaha: I think the added accountability from that model is beneficial both for the firm delivering the service and for the client, as well, because on the client’s side once you deliver the initial service and you’re kind of getting into the recurring model, there is an extra layer of accountability because you’re not a one and done. You’re showing up on a repeatable basis and you’re there with the client, and so the client is expecting you to bring some sort of transformation, to be able to point to kind of the impact that you’re having over an extended period of time. And that’s a good setup for the client, but it’s also a good setup for the firm because the more that you are applying that expertise over a long period of time, presumably the better you’re getting at that particular service, and the more opportunity you have to observe those trends and patterns among what you’re doing, and that’s elevating the quality of the service in the first place.
Chris Butler: Yeah, that’s a really interesting point. Prior to sitting down to record this, Mark and I were talking about how some things that we were envisioning are going to be future important to this firm, and I think you’re right. A lot of that comes from being down there at the ground level with your client, answering their questions, receiving their problems as they encounter them. I think when you think of yourself as selling engagements that are project-focused and you’re serializing that, if you can retain a client relationship if you’re not immersed in their world in a way where you’re sharing your expertise and mapping it to their problem, but you’re just waiting for them to call you, or you might have some locked-in program that, like mark said, is more retainer-based, it’s going to devolve into order-taking pretty much immediately as soon as you’re done your initial work, and that is what we saw back in the day when you talk about our old TMS model.
TMS didn’t really work very well because we didn’t have a real program that kept us down with the client, encountering their issues, and sharing expertise on a monthly basis. We just basically said, “We’ll show you some things and then you tell us what you want on a regular basis,” and so we’d built this initial thing and then it immediately sort of … the strategic bedrock of it went away. So what you’re saying is absolutely right. If you’re not down there with your client month in, month out, you’re not going to be able to see their future in your own very well.
Speaker 1: You’re listening to Expert Marketing Matters, a podcast about generating ideal new business opportunities by creating and nurturing digital marketing systems and habits that have a measurable impact on your bottom line. This podcast is brought to you by Newfangled, a digital marketing consultancy focused on empowering experts to do better digital marketing. You can learn more about Newfangled’s digital marketing method at newfangled.com.
Mark O’Brien: There are two aspects of this. There’s the recurring revenue, so there’s the sort of long-term, possibly endless ongoing relationship with a client where you’ve got a large amount of people paying you a small amount of money each month, right, and small is relative based on what you’re doing. That’s one thing, and that’s really important, but we also change our billing model for initial projects. And Chris, you talked about we get paid a big chunk at the very beginning, and then we’re in debt to the client until we earned that chunk, and then another big chunk in the middle, and then once again we’re in debt, we’re sort of [inaudible 00:15:38], and then we have to wait for that last chunk, the third chunk, right? And our projects at the time would take anywhere from six to 12 plus months, right, so we’re dealing with long periods of time here, and that last payment was really hard for us, and also was really hard for the client to come up with the first payment.
Lauren McGaha: Right.
Mark O’Brien: And that was really difficult. And that created so many issues, and our decision to flip that and just go to, okay, what’s the total amount of money we’re going to really need to spend over the course of this year with this client? And let’s just flatten it out even though we know we’re spending a lot more at certain times than other times, and we could get left holding the bag if they just bail and disappear, right, but assuming that’s not going to happen because we’ve had good clients for a very long time and we trust them, just flattening it out to a single consistent monthly payment. So, for example if it’s 60K, instead of asking for 25K at the beginning, and 25K in the middle, and 10K at the end, just 5K a month for 12 months. And that way our main point of contact doesn’t have to go back to the billing office saying, “Okay, we need another payment,” they just put it in the accounting system, and they know it’s going to run, and there’s never really another question about it. [crosstalk 00:16:46]
Chris Butler: Yeah, you used to use a really nice analogy that I think underscored how easy it made the decision, because back then you’d say, “Okay, the price is $60,000.00. Well, where am I going to get $60,000.00? Do we have that in the budget? Are we going to have to jump through a bunch of hoops to procure that?” Now you’re saying 5K, and I remember you used to say something along the lines of, “Look, for the price of less than what it would cost you to hire one person you’re going to get five people who are category experts on this stuff. You’re going to get a team of five for the price of less than one.”
Mark O’Brien: Yeah.
Lauren McGaha: I think it also tees up the conversation for beyond the initial project scope to be successful, right, so it’s a year-long program, and they’re paying this expected payment each month, but then ultimately the time comes like, okay, the scope of that project’s done. What do we do now? We’re not asking for another chunk of $30,000.00 or $25,000.00. We’re just saying, “Hey, what if we lower the monthly payment by X number of dollars, and you’d get these things?” It’s a lot more digestible for the prospect.
Chris Butler: So it sounds like what we’re saying here is that, not only from a strategic perspective on managing the business, is this the right way to go? It makes metrics easier to hit, it extends your cash flow out much further than you would ever have before.
Mark O’Brien: We should talk more about that detail in a minute.
Chris Butler: Yeah, let’s come back to that. It makes the ebb and flow financially a whole lot more stable, but it also creates this feedback loop that actually, I guess, reinforces and enriches the way you deliver expertise in the first place. I think you were saying earlier it’s a much more natural fit for delivering expertise. If all you were doing is hands delivery, like coding, then it wouldn’t really map to that very well because there has to be this sort of intrinsic connection between hours, and code, and money. But in this particular case we’re talking about sharing expertise, which is much more like teaching than anything else.
Lauren McGaha: And you’re asking the person that you’re sharing it with to synthesize that information and infuse it into the culture of how they do business. And that’s much more repeatable on a monthly basis than it is coming in this big peak of a ton of work, take all of this advice, go implement it, and then call us when you’re ready for more advice. This actually speaks to making a more effective program that is just delivered into the habits of that organization every single month.
Chris Butler: Right, you both have said habits a couple of times, and I think that’s a really critical thing to think about here. Habits require repetition, right? What is the adage about building a habit? You have to do something for what, six weeks? Is it something like that?
Lauren McGaha: Is it like 21 times?
Mark O’Brien: [crosstalk 00:19:09] 21 days. Six weeks. Four months.
Chris Butler: Yeah, there’s some idea of a minimum viable repetition to build a habit, whatever that number is. The key, to me, is repetition. I remember there’s a similar concept for teachers where it’s like 90% review, 10% new material day in, day out.
Mark O’Brien: Sounds maddening.
Chris Butler: It seems maddening, right, or like what a client said, dehumanizing, in the past. But it’s the antithesis of that. It’s very human because that’s what our brains need to integrate this stuff. So you’re down there talking to a client, I’m pointing at Lauren right here, and you need to review over and over again, right, and to make that as transactional as it would be otherwise if you didn’t build in the sort of recurring pace financially would feel really weird. It would take like two months before the client felt like they weren’t getting what they were paying for.
Mark O’Brien: Yeah, I love this topic. It’s very interesting to me from a business management perspective, too, and we have a lot of owners and decision-makers who listen to this podcast, and one thing the particularly astute ones might be thinking is, “Well, if I just change everything to even monthly payments, then I have a huge cash flow hit.” And that’s true. It was really nice getting those 40% payments in one chunk, right? That was great, but then there’d be holes. And that was not great, right?
Chris Butler: We used to be happy about a certain negative number when looking at the cash flow.
Mark O’Brien: The cash flow, yeah, oh [inaudible 00:20:33] two months out.
Chris Butler: It’s only negative this.
Mark O’Brien: Yeah, yeah, right.
Chris Butler: It’s fine. We can fill that hole.
Mark O’Brien: We can figure that out.
Chris Butler: And that makes sales hole-filling.
Mark O’Brien: Right, exactly. Yeah, yeah.
Chris Butler: Which you don’t want.
Mark O’Brien: No, no. It just really strips your confidence. So a key thing is that, yes, if you do decide to transition to this model from chunk-based payments, percentage-wise, to even payments throughout the term of the engagement, if you’re going to do that wholesale across the board you are going to have a cash flow hit because-
Chris Butler: It’s an investment in the future.
Mark O’Brien: Right, so imagine the difference between getting a 25K payment or a 5K payment, right? That’s a big, big, big difference, but what is amazing, and so it took us probably about seven or eight months to see the transition happen. And we did it when we had the cash flow to sustain it, and we were hoping for the best.
Once you do get past that, and you no longer are reliant on those chunk-based payments, and you build up lots of those 5Ks and they are month, after month, after month … I’m using 5K as an example. Then your cash flow becomes so stable and strong, and if one thing falls out, well okay, you can handle that, right? But if over time you’re just building it up and you’ve got more and more than going in, plus then you actually are adding true recurring revenue, because this thing we’re talking about, doing the same initial engagement you’re going to do anyway but just changing your billing terms, that’s not recurring revenue. Recurring revenue is what goes on indefinitely after that time.
Chris Butler: Right.
Mark O’Brien: Right. So those are two different things, but they speak to fulfilling the same need and solving the problem of the erratic cash flow that some many principals are so scared of.
Chris Butler: Right, the need both internally and externally. Internally at the firm to keep cash flow steady, externally for the prospect, or the future client, to make it more viable, more affordable, more even for them to buy into.
Mark O’Brien: Right, yeah. For the prospect it’s, yeah, it’s easier to buy, but also they’re going to get more out of it. You’re going to have a more lasting impact [inaudible 00:22:22].
Chris Butler: You told our story, which is kind of a bad luck story, right? The recession hit, we thought we had dodged it because we were like, “Oh, we’re web development, everyone needs that. You can’t turn that off.” We had two bad months in a row where we had prior to that this pattern of bad month, good month, borrowing from the future each month knowing that we’re going to get it back. I would imagine that we probably would have not survived had we not accidentally had a baseline recurring revenue model by way of our hosting. We were a web development company, and so we had this 10-year, 15-year legacy of clients having paid us for hosting, and that kept us a little bit afloat. We had to downsize, right, because we literally did not have the cash to keep those people on, but had we not had that I think this thing, it’s the question you’re anticipating.
The person listening who may not have even something like that where everything is project-based, they’re going to have to think about how they might onboard this, and it might be even more costly than we experienced. I would imagine what you’d, one, identify is creating a service that lends itself well to this, which is an extension of something you already do anyway, possibly reframing it and treating a parallel pilot program to this for six months to a year while still operating the same way in terms of sales, and let yourself evolve into that pattern, maybe even over the course of 12 to 18 months.
Mark O’Brien: Yeah, I think that’s an important point. You can’t just turn on the switch on this stuff.
Chris Butler: That’s right.
Mark O’Brien: Yeah, you’ve got to very intentionally, slowly build it up and tweak it.
Chris Butler: Right. It’s never not going to be an investment. It has to be that because that’s the whole purpose here, but in terms of you’re not going to switch your whole paradigm overnight. You can’t afford to do that. Even for us it was hard, even with that baseline that we discovered was so essential at the time. But yeah, I think a pilot program where you can look at what your clients want. I mean, you perceived that automation was a really huge opportunity and it mapped what clients want. I remember we had a client that was from an exhaust hosing company, and I remember she used to be frustrated every month with the order taker relationship that we had, and she said, “If you guys would just tell me what I need on a regular basis I’d be really happy to pay for that.” And that was a real switch.
Mark O’Brien: It was.
Chris Butler: This person is no longer our client, but that was a huge insight that just completely dovetailed with this discovery that we learned the hard way in the market, and I think some of the services that you’ve created, Lauren, I think map to that. Like you discovered the client need stat, and you can start to run that in parallel with everything else. And all of a sudden it becomes integrated and becomes essential.
Lauren McGaha: Yeah, it aligns with the way that we grow our business today now. Anything that we create is going to be meeting this recurring revenue model because of everything we’ve already outlined, because it is beneficial to Newfangled, but it is much more impactful for the client themselves. But that certainly has been a journey, and I would imagine the firms listening to this trying to figure out how they are going to begin making that shift, they probably are anticipating some sales objections along the way, which is something I would imagine that we faced when we started to get into this, right?
Chris Butler: That’s a good question. Did they outweigh the objections we were facing in the other model? I don’t know.
Mark O’Brien: No, this changed, simplified the sales process for sure. It made it easier and better. And the other thing is you said the terms-
Lauren McGaha: But it does require a long term commitment, you know. The way that we sell today, it’s like you have to sign on for a certain period of time because we are flattening out the payments over that period of time, and that is different in some way. I mean, with a website it’s different because you already know that’s going to be a long-term project, I guess, and so you know you’re going to get a site at the end of it. But for firms listening who aren’t building websites, that are selling projects and then looking at flattening it out, you have to have a required period of time to be able to do that, and I would imagine that would be the sales objection that you’d have to kind of work around.
Mark O’Brien: It can be, and we see that sometimes.
Lauren McGaha: Yeah, we do.
Chris Butler: Yeah, in both cases it’s the time it takes, right? With website stuff it’s kind of easier for people to accept that, oh, it’s going to take longer than I thought because it’s really complicated and people have to write lines of code, and you have to meet and make decisions, and things have to be made. When you’re doing coaching, and training, and setup it’s harder for people to get that, but you know this, it still takes time, and we go back to the teaching concept. It’s amazing to me. I know when I have client contact they don’t get it the first time, right?
Mark O’Brien: Mm-hmm (affirmative).
Lauren McGaha: Yeah, sure.
Chris Butler: There’s so much to get that it’s by the end that there are ah-ha moments that a client will have where I’m like, “Oh, yeah, you’re just getting that now.” It took four months.
Lauren McGaha: Yeah. It also speaks to the kind of client you want to work with, and building up or flexing that muscle of being able to really chase that kind of client, the one that really wants to learn, that deeply values your expertise, understands that they don’t get it and they’re probably not going to get it off the bat, and that they need that repeated exposure to your expertise in order to grow in the way that they want to, and that that’s going to take =a certain amount of time.
Chris Butler: You’re also making me think of the type of client that you want and how busy they’re going to be, right, a healthy client. We have a client right now who is unique in that he has set aside a bunch of time to go through this program, so he’s always champing at the bit, which is really refreshing. He’s like, “Give me more. I want to learn more. I want to do more.” And that is so different than what we typically see, which is someone saying, “Hey, can we slow this down because I got a lot going on in my world right now. I need to ruminate on this, and think about it. I need to have conversations, discussions.” It takes time to take all of the insight that you’re delivering to a client and for them to distribute it properly, think about it, make the right decisions. It’s really rare that these days that we have clients saying, “Hey, can we speed this up?” You know, once they get into it.
Mark O’Brien: Once they get into it. Prior to it they think they can go twice as fast.
Lauren McGaha: Exactly. Convincing them, because the same individuals who become those people who want to speed it up are singing an entirely different tune during the sales process.
Chris Butler: Well, yeah, and the outcome’s unique. I think I overheard you, Mark, the other day saying to somebody that there’s almost this predictable dynamic where the people who want to speed up the most at the outset end up slowing down the most.
Lauren McGaha: Slowing down the most, yeah.
Mark O’Brien: Yeah, that’s a rule. And one thing this whole recurring philosophy presupposes is that you want to have a long-term relationship with your clients, right? And there are lots of firms, specifically consulting firms, who do not, right? They want to get in, give great advice, and then be done. And the last thing they would want is to have to deal with those clients forever, right? Now for us we love that, and there’s a lot of money there, there’s a lot of impact there. The relational side of it is very enjoyable, like developing deep relationships over a long period of time is really, really nice. But that’s not for everybody for sure. And os if you don’t want that, and you’re not selling a technology suite, then obviously this whole recurring game is just not for you.
Chris Butler: Right. That’s a good point. I think that’s baked into our right fit idea, you know, that not only is the right fit client the kind of client that could benefit from the kind of expertise that we have to offer, and the kind of expertise we have to offer takes time to get. But yeah, we also want to keep working with them over the long term. It’s like they’re the same thing, essentially. But yeah, that’s not going to be true for everybody, and that’s something to think about. But I think for those people who are going to envision a pilot program and trying to sort of weave this into their way of operating, that gives them a little bit more time to think that through, to think about, well, maybe we have a different kind of client that this works for and we can continue to operate with the other client where there’s shorter term relationships.
To your earlier point, you don’t have to throw out all sources of revenue and structures of revenue to get recurring revenue to play a meaningful role in your firm. You know, it doesn’t have to be 100%.
Mark O’Brien: No, no.
Chris Butler: Right, you have to identify what portion it needs to be. For us we wanted to go from 25% to 75%, and we achieved that over a good while, but yeah, you should think about is this all in or is it a piece?
Mark O’Brien: Yeah, and easy come easy go, hard come hard go, right?
Chris Butler: Yeah.
Mark O’Brien: And so this is not an overnight thing. If you are interested in this, to your point from a few minutes ago, you got to start building up, and it’s going to take a long time. But the nice thing is, typically with these things, the longer it takes to build up the longer it’ll take to break down. And that’s the main thing, again, getting rid of the erratic cash flow cycles. So.
Chris Butler: Yeah. This has been cool.
Mark O’Brien: It’s been fun.
Chris Butler: We don’t often talk about this kind of stuff, but I think that there are probably … the implications of everything we talk about on the marketing side are right in line with all this stuff. So if anyone’s listening and has more questions about this in particular, Mark, I’m sure you’d be interested in hearing from people and having conversations about this. So you can reach out to Mark. You can find his page on our site, newfangled.com, and he’s got a little contact widget right by his face so you could ask him anything, right? Ask you anything.
Mark O’Brien: Anything.
Chris Butler: Anything?
Mark O’Brien: I’m going to have a great answer no matter what.
Chris Butler: Perfect. All right, well talk to y’all next time.