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One of the questions I am most frequently asked is “How do I turn training into a recurring revenue?” If you work in SaaS, you know that recurring revenue is king, and moving your enablement services to TaaS will align with company priorities.
Let’s start with what recurring revenue is. The simplest explanation is it’s revenue you can count on coming in on a monthly, quarterly and annual basis for the life of an active contract. This provides a company with a steady and predictable revenue stream to support operations and invest in innovation. There are different ways of reporting recurring revenue, for instance some companies report on MRR while some report on ACV. If you aren’t sure what your company does and how revenue is qualified a meeting with someone on you finance team is essential.
The existing training service model usually looks like this: pay $1000 and have a seat in my class. The learner pays that amount one time, and may or may not come back to continue their learning. The subscription model changes this, and there are three common strategies companies can implement to support TaaS:
Regular fee per learner: This ties the journey to a person (seat). The learner will un access to all resources and can fully experience the learning journey you have developed. This model works wonderfully for asynchronous delivery (ie. on-demand elearning), and for inclusion in special user groups, webinars, etc. This is the easiest to qualify for ACV or MRR.
Bundle of credits or seats: This option provides a specific number of seats on a monthly basis, and provides your customer with the flexibility of giving those seats to different team members at different points in their learning journey. If your delivery relies on ILT, this model will likely make the most sense for your customers.
Effort or deliverable based: If you have a custom enablement offering, this means scoping an annual agreement with a set burn rate for effort (hours) or deliverables. In these agreements, there will likely be a portion of revenue that is one time to build the enablement program, and another portion for the ongoing service, which will often be redelivery, onsite time with an expert, etc.
Hybrid: You may have multiple options/SKUs which customers can select, which allows for better personalization.
A few important notes: for GAAP revenue recognition, subscription offerings should be either use it or lose it for seats/hours - ensure you work with your finance business partner to ensure revenue eligibility. There can also be exclusion within these: for example if you offer synchronous and asynchronous learning solutions, you can choose to offer a monthly subscription for on-demand elearning courses, but exclude ILT. Finally, ensure you connect with the person in charge for sales compensation; ensuring TaaS revenue is quota eligible and commissioned at the same or similar rate as other ACV or MRR reveue can have a big impact.
Have you deployed a subscription model for learning at your organization? What has worked well for you?