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Companies wishing to establish a recurring revenue business model are looking to ensure the stability and profitability of their organization.
However, before doing so, it is important to be aware of the impact that this realignment will have internally, particularly on the structure of the sales team and the compensation plan. It is also necessary to acquire the right technology to support such a reorientation.
Impacts on the structure of the sales team
The company must first structure its sales force and ensure that everyone's role is clear. A hunter-type representative ensures the company's growth by seeking new customers. An account manager is responsible for maintenance, and a farmer develops an account that is already integrated into the organization.
The size and area of expertise of the organization will have a significant influence on the structure of the sales team and the number of people required to close a sale.
Don't neglect the customer experience
When you choose this business model and the sales structure has to be reviewed, you have to be very attentive to the customer, who could be overwhelmed by this army of representatives who take charge of his case in turn. It is necessary to make the client's life easier by communicating precisely which representative made the initial sale with him, which one ensures after-sales service, which one takes care of maintaining his account, and finally which one contacts him when the company has proposals to make to him.
Therefore, you must avoid confusing the client. In addition, the transparency of your structure's workings will demonstrate that your organization is well organized to ensure effective follow-up.
Impacts on compensation plans
To adopt a recurring revenue business model, the company must also review its representatives' compensation plan.
The latter must be clearly defined, because when a business model involves the intervention of several people with the same client, the issue of income allocation can be a difficult one. This is even more so for collaborations between marketing and sales. Who contributed to this income? Who should receive a commission for this sale?
Executives must also prepare their sales team for this change and wait for certain factors to be met. Otherwise, the new compensation plan could lead to discouragement and disengagement among some sellers.
Pay attention to salespeople motivation
The compensation plan must motivate, encourage sellers not to rely on their past success and the occasionally advantageous conditions of recurring sales. In other words, it should not encourage complacency.
This revised compensation plan must force every seller to double their efforts by seeking new revenues, whether as a hunter, account manager or farmer. In this sense, it must be adapted to the risks and challenges of each role within the same organization.
Have a CRM to ensure a proper follow-up
This type of business model requires the use of a good CRM to, on the one hand, track the pipeline of potential customers, and on the other hand, remain up to date in the renewal of sales with existing customers. A reliable CRM indicates when it is time to renew an account. Therefore, it should not be assumed that these renewals will be automatic, as accounts may be overlooked.
Obviously, some companies with a well-established recurring revenue model have a renewal automation system. However, in the event that a renewal is not made, an account manager will need to contact the client to understand the problem.
If you want to implement a recurring revenue business model within your company, you must:
- Properly structure your sales team, and readjust your focus as you grow;
- Establish a motivating and adapted compensation plan;
- Have the right technology to ensure this revenue recurrence.
Making such changes is not easy, so I encourage you to carefully plan the integration of recurring revenues into your business model and act methodically.