Recurring Revenue
Revenue that automatically continues each period under contract or subscription — the highest-quality form of revenue for valuation purposes.
Recurring revenue is revenue that's contractually committed to continue across future periods — monthly subscriptions, multi-year service contracts, retainer relationships, maintenance agreements. It's distinct from project revenue, which has to be re-won each cycle, and from transaction revenue, which depends on customers continuing to choose your business each time. Buyers value recurring revenue at higher multiples than project or transaction revenue because it's predictable, transferable, and survives the change of ownership without renegotiation. The same dollar of EBITDA can be worth significantly more if it comes from recurring sources.
The mix of recurring versus project revenue can change your multiple meaningfully — sometimes by a full turn or more.
Buyers underwrite recurring revenue at face value and project revenue at a discount.
