Glossary

Recurring Revenue

Recurring revenue is revenue that a business can reasonably expect to continue receiving in future periods based on existing contracts, subscriptions, or established customer relationships — as opposed to one-time or project-based revenue that must be re-earned with each transaction.

Recurring revenue is one of the most significant value drivers in a business sale. Businesses with strong recurring revenue typically command EBITDA multiples 1.5x to 2.5x higher than comparable businesses with project-based revenue in the same industry, because recurring revenue reduces the buyer's risk that revenue will not continue under new ownership.

Types of recurring revenue include: subscription or SaaS revenue (contractual and highly predictable), retainer-based professional services (committed but may require renewal), consumable re-purchases (habitual but not contractual), and long-term maintenance or service contracts (contractual for a defined term). For business sale purposes, multi-year contracts locked in at known prices are the most valuable form of recurring revenue.

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