The Simplicity of Quote to Cash
From almost the beginning of time, most business to business companies based their sales process on the Quote to Cash model. Honestly, I am not sure who coined the term, but it brilliantly summarizes the goal of the sales effort. Sell stuff. Get cash!
What a great model to work with! Very simple to manage and easy forecast. Salesperson provides a quotation for the total value of the sale and provides a date for when they think they will actually get the money. Forecasting and product sales tracking could not be easier.
Somewhere along the way something changed and companies realized monthly recurring revenue or MRR was a much better alternative. If they could figure out how to offer their products and services that way, that would be the preferred model. It is not a new concept. In fact, the late Howard Hughes Sr. built his fortune renting oil drilling bits as opposed to selling them to customers.
Introducing the Quote to Subscription Model
Today, most companies are offering some type of MRR product or service. The reasons are simple. It’s a great way to increase the value of your business and makes your company much more attractive to potential buyers. In this case a bird in the hand is not worth two in the bush.
The problem however is that subscription management and managing the Quote to Subscription sale is much harder. Do you forecast monthly? Annually? Should you consider existing subscriptions in your forecast? What about churn (loss of subscriptions)? These are completely legitimate questions and the answer is “…yes and it depends…”
Then of course, depending on your customer contract, you have to be continually selling your products and services to avoid having churn. If you have a successful offering, I assure you your competitors will be working hard to make your customer theirs.
Embrace the Change
The good news is that technology has advanced greatly on the Quote to Cash model. Companies like Alternetics have taken those systems and modified them specifically to handle subscription management and the Quote to Subscription model. The bad news is your business can no longer expect to grow on excel spreadsheets and star salespeople’s memory. Subscription management is far to complicated and grows more complicated with every customer.
Whether you are currently providing your products and services on a MRR basis or trying to move your business in the that direction, embrace the new Quote to Subscription model and the changes you will need to make. Subscription management is more complicated, but the benefits for your business growth and value are exponentially greater. Most of all, make sure your infrastructure is ready for the growth you can likely expect.
Need a Quote to Subscription system for your business? We would love to help.
About the Author
Kip Smith - Founder & CEO
Kip is a business process engineer who has spent the last 20+ years providing architectural and executional guidance to companies wanting to streamline their customer lifecycle and operational productivity. With experience in both large corporations and small entrepreneurial companies, he prides himself in being able to quickly identify the road blocks that keep organizations from reaching their full potential and then implementing solutions that remove those roadblocks.
Prior to founding Alternetics in 1999, Kip was a member of the senior management team for two large publicly traded companies, serving in both sales and operational leadership roles.