Machinery manufacturers and distributors track after-sales revenue three different ways, and mixing them up means acting on the wrong number. Here are the three metrics, what each one actually shows, and which one to run your after-sales operation on. Each metric is your current companies after-sales (parts, consumables, services) revenue percentage against different number:
1. Percentage of total company revenue
This shows you how after-sales-heavy the business is overall. Useful for a CEO or investor doing a quick health check, but it is impacted by reasons that might not have anything to do with after-sales itself. A strong year of new machine sales pushes this number down even if after-sales performed exactly the same as last year.
2. Percentage of one machine’s initial purchase value
This is a unit economics number. For a single machine sold, how much recurring revenue does it generate per year, against what it originally cost. It’s the cleanest signal for pricing, for sales commissions, and for answering whether a machine is worth more to the company after the sale than at the sale.
It only works properly if you separate machines sold in similar periods. Compared directly, the older machine always looks better on this metric. And it has nothing to do with how well either one is being managed. Also revenue potential is likely to decrease due to the fact that older machines’ value might also decrease over time.
3. Percentage of total install base value
This tells you how well you’re monetizing all machinery you’ve ever sold that’s still in use. It’s the real wallet share of the fleet, and the best number for tracking whether after-sales is capturing more of what it should, year over year, independent of how new-machine sales are performing.
Which one to actually run the business on
- Company revenue percentage is a board-level number.
- Per-machine percentage is the actionable number to keep every machine’s lifetime value realized.
- Install base percentage is the one to track quarter after quarter. It isolates after-sales performance from everything else going on in the company, against a single benchmark you can keep constant.
One nuance: install base percentage can be impacted by your biggest customers, while other customers machinery might stay unserviced instead. So you act on per-machine percentage, customer by customer, and track the overall result on install base percentage.
Who can actually improve it
Knowing the number is half of it. The other half is who’s positioned to impact it, and that depends on how the machine reaches the end customer.
An OEM selling directly to its own customers controls this lever. It owns the install base, the customer relationship, and the after-sales offer end to end. If the install base percentage is underperforming, the OEM can act on it directly: send reminders, build service agreements, prioritize the right customers.
A distributor is always positioned to impact this number. Distributing is a commercial function by nature, and a distributor holding the customer relationship usually has more day-to-day control over the after-sales offer than the OEM that built the machine.
The harder case is an OEM that sells only through distributors. The OEM still owns the metric on paper, the install base is technically theirs, but the distributor owns the relationship that would actually impact it. The OEM can watch the number underperform without being the party that can fix it directly.
We saw this with a Lithuanian machinery manufacturer in the bakery industry. Roughly 400’000 Eur of after-sales revenue belonged to their distributors, because the distributors held the customer relationships the OEM never touched directly. Both sides would benefit if the OEM could see what had been sold and serviced, and the distributor had a simple way to track it and remind their own customers. Getting there is as much an agreement question as anything else: how the OEM and distributor share that data and that revenue.
Both positions are workable. An OEM selling direct can act on the install base number itself. An OEM selling through distributors needs the distributor’s cooperation, usually through a shared system or a different kind of agreement, to act on the same number at all.
Where the number comes from
In the next article we show these metrics with real case numbers: what a small distributor’s install base was worth, what they were actually earning against it, and where the gap was. It runs on three exports most manufacturers and distributors already have: the customer list, the machinery list, and the invoice data. No platform required to get the number.
That’s the part worth being direct about. Getting to the number is a spreadsheet exercise. A software is what lets you keep it live instead of rebuilding it every quarter, and scale it past hundreds of machines. Direction for after-sales improvements start with the data you already have, way before the software selection.
