MRR Isn't Everything (Here's Why) [TMR #053]

Would you rather have $100k up front, right now, or make $5k MRR (monthly recurring revenue) forever?

Obviously one will give you more money over time, but man, $5k/mo seems slow doesn't it?

Answering this honestly will give you a good indicator of your unique skills in business.

See, being more of a now-mindset person is beneficial for sales, top-line revenue, and new revenue.

But having a later-mindset is beneficial for systems, profit, and recurring revenue.

While the latter will be better in the long-term, the former is sexier. It sells. It is what all the gurus want to sell you... and you actually buy it.

But even as an agency owner that focuses almost entirely on MRR, I've come to the realization that MRR isn't everything.

Recurring revenue is not "better" than new revenue in all cases.

Let's look at some real numbers:

• SaaS companies with 100% recurring revenue: Average growth rate of 17.5% annually

• Service businesses with mixed revenue: Can see spikes of 50-200% growth in peak years

• Pure project-based agencies: Higher profit margins (40-60%) but more volatile revenue

People who want to get rich quick will focus on new money, while those who want to get rich for sure will focus on MRR.

But there's a lot to be said about the importance of new revenue.

Here's why:

1. Cash flow matters

   1. Big upfront payments can fund growth faster than small monthly payments

   2. Example: HubSpot still makes 30% of revenue from one-time services despite being a SaaS company

2. Market feedback

   1. New revenue forces you to stay current

   2. You're constantly testing your offer against today's market

3. Team motivation

   1. Nothing energizes a team like landing new deals

   2. Recurring revenue can become mundane and lead to complacency

4. Innovation driver

   1. New revenue pushes you to evolve

   2. MRR can make you lazy and resistant to change

Now, I do think all new revenue should lead to MRR.

But, I don't think that the pursuit of new revenue should be stopped. This is where I've messed up in the past, and I see others do as well.

New revenue is new life. New blood. It means going on offense. It means staying on top of what's working. It revives teams who are stuck in the mundane. New revenue is essential.

The sweet spot?

Build a business that can:

• Generate explosive new revenue when needed

• Convert it into steady MRR

• Rinse and repeat

Look at the most successful companies:

• Salesforce: 93% subscription revenue, but still drives major new revenue through upgrades and expansions

• Microsoft: Base of recurring revenue, but constantly launching new products

• Amazon: Prime subscriptions + aggressive new market expansion

It's not either/or.

It's both.

You need the excitement and cash injection of new revenue.

You need the stability and predictability of MRR.

Stop choosing sides.

Start building both muscles.

That's how you win in the long run

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