Having built and owned multiple businesses over the last 15 years, including my current company MISO3, I have worn many hats – sales, operations and finance. Like most sellers of recurring services, I am aware that closing deals, earlier in the year, is better than at the end of the year. Simply, $1,000 of monthly recurring revenue sold in January provides $12,000 of annual revenue; while the same sale in December only leads to $1,000 of revenue for that same year.
What always struck me as odd is why there is not the same urgency to save on recurring service commitments. Especially since the $12,000 of savings is worth more to an organization’s bottom line than the $12,000 in new sales (assuming margins are not 100%).
After speaking with other business owners and executives, I’ve concluded there are (3) primary reasons for this tendency to procrastinate savings.
Reason #1 — Unlike new business, savings does not have a deadline. It’s no surprise, sales folks have a quota. This quota is often based on a time period that has a specific deadline – end of month, quarter or year. Missing this deadline has a direct economic consequence to that sales representative.
In contrast, savings is viewed more holistically – “our monthly service commitments dropped by $1,000 per month.” At the employee level, there is no direct benefit by achieving this savings on a timely basis. Alternatively, if the $1,000 could have been recognized two months prior, there is no accountability for the $2,000 in lost savings.
Most organizations are unaware of when savings opportunities can be achieved and therefore are unable to establish savings deadlines.
Reason #2 — Not knowing prevents action. Managing recurring services is unlike a one-time service event or traditional asset tracking. Dates must be recorded and constantly compared to the current date, end-of-term actions must be tracked as well as internal ownership. Multiply these many data points by the myriad of service commitments an organization maintains, throw in a distributed and transient workforce, and the problem becomes unwieldy. Recurring costs range from a few dollars to thousands and terms can span multiple years – allowing commitments to easily grow unnoticed before the waste is truly recognized.
Organizations often do not know what services are renewing, when to renew and the financial impact of not acting in a timely way.
Reason #3 — Is it worth it? Organizations have little insight into the savings that can achieved by managing their recurring expenses in real-time. Drastically declining prices in telecom and IT products and the elimination of waste, attributed to auto-renewals and unused services, magnify these savings opportunities.
Most organizations have incomplete data surrounding their service commitments and the idea of getting this information can be paralyzing. Also, even if the task of gathering and analyzing occurs, users are unsure what to do with this information so that this process does not have to repeated.
Unaware of their service tracking capabilities, organizations do not have a sense to the financial benefit or level of effort to improve it.
Cost Savings Made Simple
Over the last 3 years, I’ve built an organization and developed a technology that addresses the concerns that result in savings procrastination. Starting with a platform, named MISO, we provide clients with real-time savings deadlines, missing data reporting and the economic impacts of action or non-action. We then combine this platform with deep industry expertise, creating best practices surrounding starting, maintaining and growing your organizations recurring service commitments.