Increasing sales efficiency is just one of the many ways MSPs can grow monthly recurring revenue (MRR). Top-performing MSPs understand why streamlining the sales process can help salespeople with adding new MRR at the right price. If you’re unsure of how you can improve sales efficiency in your business, we at TruMethods are here to guide you.
The MRR sales formula
First, it’s important for you to understand the MRR sales formula. To get MRR, you simply multiply first-time sales appointments (FTAs) by close ratio by average MRR amount.
MRR = FTAs x close ratio x average MRR amount
Your goal should be to generate the most MRR with the fewest number of first-time appointments. Think about it: Everything comes at a cost, including generating leads, meeting with prospects and managing the sales process. If you can generate more MRR with less FTAs, you will — without a doubt — achieve a higher level of sales efficiency.
Okay, but what about close ratio?
Close ratio is defined by the number of new MRR agreements you close relative to the number of FTAs. For example, your close ratio would be 10% if after you attend 10 FTAs you close only a single sale. While there are many factors impacting close ratio, there are three you should always consider: lead quality, perceived value and sales process.
Not all leads are created equally
Your close ratio will change depending on the type of leads you’re pursuing. For example, you'll have a higher close ratio with warm referrals and prospects you've met with in the past compared to unqualified inbound marketing leads or cold calls to a cold list. This doesn’t mean cold calling and inbound marketing are bad. In fact, they can be important elements of building a sales and marketing engine, but there has to be a balance: You have to manage lead sources appropriately.
Now, what exactly is the perceived value of your MSP service offering?
Perceived value is the most important aspect of building a reliable MSP sales engine. You can measure perceived value by the monthly price per seat your customers are willing to pay. You can also measure value by creating “separation” (the ability to separate the results of your service offering as compared to competitors) in the sales process.
Our training and software (which you know as myITprocess) are aimed at building your value and making it easy to create separation in the sales process. Separation increases your close ratio and your average contract value (average MRR) dramatically. This is why top-performing MSPs sell more MRR at a higher price.
Reevaluate your sales process
Do you have a documented and repeatable sales process you take every prospect through? What are you goals on the FTA? How do you qualify the prospects? When do deploy key sales assets? How do you maintain control of the process? In the TruMethods training program, we teach a proven sales process — one that’s a repeatable step-by-step process that helps you get consistent results and build separation.
Growing MRR can be achieved by increasing sales efficiency in your business. Understanding MRR, FTAs and close ratios is just the first step. The final step: Figuring out how lead quality, perceived value and sales process can improve your close ratio. Putting everything together will help you increase sales efficiency and grow MRR.
Interested in learning more about improving your MSP sales process? Download this free whitepaper about 3 of the most common sales mistakes MSPs make.