Elevate Your Business

• By Andy Schreyer
• Sep 18, 2024

In today’s dynamic business environment, companies specializing in physical security are constantly evolving to remain competitive. One strategic shift these businesses can make to give them the advantage is a full or partial transition to a recurring revenue model, popularly called a subscription service. This approach will bring numerous benefits that not only enhance business stability but also improve customer relationships and drive innovation. Recurring monthly revenue (RMR) or recurring annual revenue (RAR) are two recurring cadence choices that work simply and effectively.

Financial Predictability
The most immediate benefit of an RMR model is financial stability. Traditional business models often experience revenue fluctuations as projects flow through the process of ordering equipment to installing the systems to billing upon completion.

This multi-step process leaves room for errors and makes financial planning and investing challenging. Subscriptions, on the other hand, provide a steady and predictable income stream, enabling companies to plan and allocate resources more effectively. This stability supports sustained growth and allows for consistent investment in technological advancements and service improvements. Reliability of income helps companies better manage head count and cash flow.

Driver of Continuous Improvement
With a promise of recurring revenue, companies are incentivized to continuously improve their offerings. Regular updates, enhancements and initiative-taking maintenance start to become standard practice, ensuring customers always have access to the best the provider can offer, whether that means software updates or advances in hardware technologies as the market demands and competition creates.

This commitment to ongoing improvement sets companies apart from competitors who may rely on static, outdated solutions and positions them as leaders in innovation.

RMR models encourage a shift from reactive to proactive maintenance and support. Companies can offer regular system checks, updates and prompt issue resolution, reducing downtime and enhancing the overall reliability of security systems. This initiative-taking approach not only improves system performance but also builds customer confidence and trust in the provider’s commitment to their security needs.

Growth to Fit Customer Needs
A subscription model provides scalability and flexibility, benefiting both the business and its customers. Clients can easily adjust their security solutions based on ever-changing needs, without the burden of significant upfront costs.

This flexibility ensures that customers can maintain the right level of protection as their operations grow or change. This adaptability also allows businesses to cater to a diverse range of clients, from small retailers to large corporations, each with unique security requirements.

Partnerships Over Projects
An RMR model promotes a long-term perspective in business operations. Team members are incentivized to think beyond immediate sales and focus on delivering sustained value over time. This shift in mindset fosters a culture of continuous improvement and innovation, as companies strive to retain and grow their customer base through superior service and advanced solutions.

Subscription models truly evaluate a provider’s ability to prove competence and build long-term relationships with customers. When a contractor is hired on a project bases, the motivation for satisfactory performance is based on short-term goals to complete the project and submit final billings.

Subscription businesses engage in a continuous partnership. This ongoing interaction allows companies to better understand and anticipate customer needs, providing tailored and evolving solutions. The result is increased customer loyalty and satisfaction, as clients view their security provider as a trusted partner dedicated to their long-term success. If the provider is not capable of meeting a customer’s needs, the deficiencies quickly become apparent.

Understanding this truth should steer buying decisions and contract language. Picking a “partner” should mean more than which contractor has the lowest price. But customers will want to ensure that any contracts contain language enabling termination should a necessity arise to go another direction.

End User Benefits
End users also stand to gain significantly from the RMR model, provided the products used are of high quality, and experience shows that satisfaction of the persons who directly interact with these systems cannot be overlooked. This model ensures that end users – daily users of the system – receive continuous, high-level support and regular updates, enhancing the overall reliability and effectiveness of their security systems.

Subscriptions often include proactive maintenance, which minimizes downtime and quickly addresses potential issues before they escalate. Additionally, with the ongoing relationship inherent in a subscription model, end users can expect more personalized service, as providers are invested in maintaining long-term satisfaction and loyalty.

This continuous engagement means that end users benefit from the latest technological advancements and tailored solutions that evolve with their needs, ensuring they always have the best possible protection for their assets. If the end user likes the system and it helps them do their job well, then the overall business relationship with the customer is much stronger. If they do not get what they need from the system, for whatever reason, they are more likely to suggest to their superiors that a different system or provider be considered.

For companies in the physical security industry, pursuing recurring revenue opportunities offers numerous advantages. From financial stability and stronger customer relationships to continuous improvement and initiative-taking support, the benefits are substantial. As the industry continues to evolve, embracing a recurring revenue model can position businesses for sustained success, enabling them to provide superior video surveillance and access control solutions while driving innovation and growth.

This article originally appeared in the September / October 2024 issue of Security Today.