Here’s the third installment of F12’s M&A Video Series: Recurring vs. Re-occurring Revenue
Do you know the difference between recurring and re-occurring revenue?
When preparing to sell your business, you need to take an “outside perspective” when it comes to revenue streams. What that means: look at your company the way a prospective buyer will view it. Sure, you love your business—you’ve poured your time and energy into it for years. But don’t overstate the value of that sentimental connection. You need to prep your business for sale by dealing with the cold, hard numbers—where your revenue is coming from. That’s where recurring and re-occurring revenue come in.
Michael Contento, F12’s Managing Partner and Business Innovation Executive, learned this lesson while he was preparing to sell his MSP, MBU. He explains that a potential buyer is far more interested in your company’s recurring revenue than its re-occurring revenue. So what’s the difference?
Recurring revenue is revenue generated by your clients on a regular, guaranteed basis, like a subscription service.
Re-occurring revenue is generated by clients who purchase products or services on a repeated but not predictable basis. They aren’t locked in to any contract, and they could choose to go elsewhere when the need to purchase your product or service arises.
Why does a buyer only care about recurring revenue? Because it’s predictable. Recurring revenue gives a financial analyst reliable, guaranteed numbers to consider when drawing up your company’s numbers. Learn more about the two types of revenue and, more importantly, how to increase your recurring revenue, in Michael’s blog post, Recurring vs. Re-Occurring Revenue: What It Means for M&A.
Have more questions about your business? Reach out to me at mcontento@f12.net. Let’s chat.