One of the keys to understanding recurring revenues in VoIP Sales is the Rule of 78. This is a simple concept, so let’s not complicate it. It goes like this:
- You make a new sale in January of $1000. That will recur for all 12 months in the year, bringing you $12,000 in revenue.
- In February, you close another deal for $1000. That will recur for the remaining 11 months of the year, bringing you $11.000 in revenue.
- For that same $1000 sale, March yields $10,000, April $9000, all the way to December with $1000.
- So, if you add that up, you get $12,000 + $11,000 + …. + $1,000, which equals $78,000.
- Using numbers rather than dollars, it’s 12 + 11 + 10 + 9 + 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 78
- For you math smarties, it can also be done as (12 + 1) x 6 = 78
- So, if you calculate your average revenue per user and your average users per account, you’ll get the average revenue per account. Multiply that by 78, and that’s your projected sales revenue
Got it? This is also why Sales in the first quarter are so important. They really set up the rest of the year.