A Minimum Will Get You the Maximum

One of the most important metrics for a managed service provider (MSP) is the average monthly recurring revenue (MRR). It impacts scalability, profitability, sales, math and customer acquisition cost (CAC). It also has a significant impact on the value of your business. So, there’s one thing everyone can do immediately to impact the average MRR — set a minimum MRR amount. 

A minimum MRR is a minimum dollar amount under which you would not bill a customer, so rather than defining your customer by the number of seats in terms of a minimum, determine it by a minimum MRR. How you set this and what you should set it at is relative to your starting point. Over time, everyone should have the goal of having a minimum MRR that is above $3,000 per month — that’s the bare minimum.

You may not be able to start there based on your situation but start somewhere. As your business matures, move up your minimum. Next, when you set the minimum, look at your customer base and see how many customers fall below the minimum. If you’re setting the amount correctly, a third or so of your customers will fall below that line. Then make a plan to fix or replace those customers over time.

A minimum will get you the maximum.

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