How MRR Transformed My Agency and My Life

It was 3 am, and I was awake.

Again.

Yet another sleepless night thinking about where my next project would come from.

Running a small marketing agency focused on websites and SEO, I was burned out chasing the next project. My pricing model was inconsistent and exhausting. I used to price everything as a project and was tired of chasing the next dollar.

I realized I needed a change.

Enter MRR—Monthly Recurring Revenue. It didn’t just stabilize my business; it transformed my life. We are now 91% MRR, and the future could not look brighter for us.

Why is MRR so great?

With project work, you're working in a feast-or-famine cycle. When you're slow, you work on business development. Then, projects come in. You shift from sales to operations, you're slammed while you build out the project, and guess what? You stop selling. You're busy fulfilling; you don't have time for sales.

When you finish the project, the fact that you didn't sell for the past few weeks/months hits you like a ton of bricks when the next project isn't lined up. So you hustle to find your next gig while your bank account wanes. The cycle continues once you land the next project.

It's exhausting.

Wouldn't you rather sell once and service the client over and over again? That's what recurring services and MRR provide you. It turns out that this is what clients want as well.

If you're struggling with how to go from project revenue to recurring revenue, read on. Here’s how I made the leap.

Step 1: Ditch the Project Pricing Mindset

The first step to embracing MRR is letting go of project-based thinking.

When you sell a project, you charge a hefty one-time fee to compensate for the deficiencies in the rest of your business model. What are you compensating for? Things like gaps between jobs. Since you have one shot at making money from the project, you take a big shot. But that's a survival tactic, not a growth strategy.

With MRR, you focus on consistent, predictable revenue. Instead of charging $20k upfront for a website, you spread the cost over a year. And maybe you don't even need to charge that much. After all, does the website really represent $20k of expense or value? Maybe it's really only worth $500 or $1000 a month if you provide web management after you build it.

Think about what it would mean to you if you kept getting $500-$1000/month AFTER you built the site. Pretty cool, huh? (note: this can only happen if you continue to add value after you're done building the website)

Yes, it’s a mental shift, but remember that what you're after is steady cash flow.

Step 2: Break Down Your Services

Think of your services as a menu. Separate web design, SEO, content, hosting and other services into distinct service offerings. Each service should be scoped clearly with specific deliverables.

For example:

• Website Design: Build up to X pages, host on our server, and we'll provide monthly updates.
• Content Creation: Produce Y blog posts per month, SEO-optimized.
• SEO Management: Regular technical audits and keyword strategy updates.

Each of these services could be sold separately. If a client buys more than one service, you may or may not want to provide a "quantity discount"...that's your call.

The important thing here, though, is that you have individual services; they're scoped separately, priced separately, and each is priced as a monthly recurring service. This clarity makes it easier to price and sell each service individually or as a package.

Also, if a client doesn't buy a service, then guess what? They don't get that service. This gives you extreme clarity for what's in and out of scope for each client engagement.

Step 3: Price for Profit, Not Panic

Start by calculating your costs. How much will it take to deliver each service each month? Include labor, tools, and any third-party expenses. A good rule of thumb is to multiply your costs by 2x-3x to ensure you cover overhead and make a profit.

That gives you a starting point. Sharpen your pencil based on your factors and risk tolerance.

Websites are trickier because they’re built upfront and maintained over time. Calculate the build cost, hosting fees, and monthly support hours, then annualize it. Divide the total by 12 for your average monthly cost. Again, consider a 2x-3x increase to allow for overhead and profit and tweak the numbers from there.

Step 4: Commitment Tiers

Clients value flexibility (to go to another agency). You value predictability.

How do we reconcile these two opposing concerns? If they want flexibility, no problem, but it should come at a price.

Solution: offer tiered commitments:

• 12-Month Commitment: Your best price, full scope of services.
• 6-Month Commitment: A higher monthly cost, less risk for the client.
• Month-to-Month: Highest cost for maximum flexibility. Some work, like web builds, must be priced as projects since they'll often take more than a month to finish.

Let clients choose what fits their risk tolerance and budget.

Why MRR Is Worth It

When I shifted to MRR, my agency pulled in $900K a year, but I felt stuck.

Within a year of transitioning, my anxiety over cash flow eased, and my revenue stabilized. We've since grown to three agencies, each focused on a different industry niche, with a combined revenue of $6M annually. We also launched The Business of Agency Mastermind to teach other agency owners how to do the same thing, and we're on a mission to build a $100M integrated agency.

MRR has been good to us!

MRR doesn’t just change your business model; it changes your life. It’s the difference between constant hustle and building a predictable, scalable business.

Have you transitioned to MRR yet? What challenges are you facing with your pricing?

Share your thoughts in the comments.

I hope this helps.

~ Erik