Recurring Monthly Revenue is the key benchmark our industry uses to value security companies. As such, it gets lots of attention. But there’s another benchmark that’s even more important: Recurring Monthly Profit (RMP), defined as
Recurring Monthly Revenue – Recurring Monthly Expenses = Recurring Monthly Profit
It’s more important, because it requires a focus on both increasing revenue and reducing expenses. RMP is behind the constant push of the larger security companies to buy up the smaller security companies…because as a company gets larger, it realizes scale economies. That means the average expenses needed to service accounts drops, so the RMP rises. Margin increases with size.
At Cornerstone, we’re focused on helping our security companies both increase their RMR, and decrease their recurring expenses. On the RMR side, here are a few ways we help:
- Monthly pre-billing audits, to find ‘old’ next bill dates, and other data entry errors
- Software option to pro-rate partial period recurring revenue
- ‘Feeder-Master’ account billing for multi-site accounts, to automate complex billing situations and reduce the chances for expensive billing errors or missed billing
- ‘Recurring Research’ software utility, making it easy to find accounts with below-market RMR, to schedule increases, and to implement those increases automatically
- ‘No RMR’ tab in Recurring Research screen, to very quickly find accounts that do not (yet) have RMR charges
- New Customer Audit Report, to quickly review newly-entered accounts to check for RMR setup (and other) data entry errors
We also have a few ways to easily review recurring expenses. To manage anything, you first need to measure it. In our recurring charge setup screen, there’s a field for entering ‘cycle cost’ related to the charge:
If these are entered, our dealers can run a Monthly Revenue Projection that shows their scheduled RMR charges, by billing period and cycle, as well as the related costs and resulting profit. So in the above example, if the monthly monitoring and billing costs ran $8.50/month, the report would show a profit of $30/month.
One of the most powerful recurring expense-saving tools in our system is the Central Station Audit Report. When our customers get a line item list of their monitored subscribers from their central station, the CS Audit Report allows them to very quickly find and fix any discrepancies. Discrepancies could be simple omissions of accounts in billing vs. accounts being monitored. Many of our dealers have saved hundreds or thousands of dollars monthly by using our report to identify a list of accounts no longer being billed, but still set up in monitoring—so never closed there.
At Cornerstone, we call the running of this audit report “the most profitable two hours you can invest.” There are several categories of discrepancies, from CSID # mismatches, perhaps due to a typo, to groups of accounts completely missing from either the central station or from the billing list. Cleaning up this list is truly grabbing the low hanging fruit.
Interested in finding out whether our recurring revenue management and tracking tools can help you increase your recurring monthly profit. Just give us a call!
Photo credit: istockphoto | Utah778