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You Don't Close a Deal, You Open a Relationship

MarketingProfs 13 Oct 2021 02:00

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If you want to stay in business, you can't focus solely on closing new deals and bagging new logos. The bulk of recurring revenue for many companies comes from keeping customers, not recruiting new ones. That means your success depends on building great relationships with new customers from day one.

Current customers account for 33-50% of total revenue growth, even at startups, McKinsey & Company has found. Some companies even find their installed customer base brings in up to 80% of their revenue.

For subscription-based businesses, the longer you're around, the more of your revenue shifts to recurring revenue from your installed baseā€”if you're doing everything right.

The following figure depicts how the bulk of revenue comes from current customers, whereas new business revenue is like the icing on top of the cake.

Annual recurring revenue vs. new customers graph

Of course, it takes time to build to this state, which is why you need to nurture current customers right from the start. Otherwise, you'll never keep all those customers paying you year after year.

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McKinsey Company
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