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MasterMinds: The UCaaS Gold Rush -- Is It Sustainable?

March 01, 2017 - Article

**Editor's Note: MasterMinds is a biweekly feature in which we invite leading master agents to share information, insights and expert opinions about what’s going on in their agencies, the IT/telecom channel or the business community in general.**

Adam EdwardsBy Adam Edwards

Compensation for selling unified communications (UC) has continued to rise. Selling UC has always paid more than selling traditional telecom, but it hit a new high when one provider offered a five times MRC spiff in addition to regular compensation.  I’ve been asked by suppliers and partners if that’s sustainable. My short answer is yes and no. Here’s why.

Market Valuation

UCaaS providers are currently valued like software companies, which is to say they’re getting BIG valuations. Consider the sale of InContact which had $240 million in revenue and was purchased for almost $1 billion. That’s more than a four-times multiple on revenue!  And, did I mention, inContact has been losing money for the last three years?  Welcome to the world of SaaS valuations.

UC is now in a period of consolidation, and that means these organizations are trying to increase their value before a sale or simply boost shareholder value on the public markets. Based on the numbers above, for every one dollar in monthly recurring revenue (MRR) a UC provider adds, they’ll receive a boost in valuation of 48 dollars!! (one dollar in MRR = 12 dollars in annual revenue times four = 48 dollars). Is it reasonable that a company would pay five times MRR or five dollars to get a 48 dollar increase in valuation?  Absolutely!

This won’t last forever, but while this valuation trend continues, expect upward pressure on compensation.

Account Value

The value of a new UC customer continues to rise after implementation. UC is more than just a replacement of traditional voice services. When implemented properly it’s a communication and collaboration platform for the organization, and it changes the way the enterprise works. When the promise of UC is realized, the account continues to grow and UC customers bill for much longer than the initial contract term. This means the value of each...

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