The Power of Recurring Revenue

Buyers and sellers alike love recurring revenue. But what is it exactly that makes it so attractive? Recurring revenue is generally viewed as a very good factor as it indicates positive cash flow, the potential for growth, business success and business stability. Let’s take a closer look at how it can benefit you.

Show You’re in Demand

Businesses, including IT companies, are valued higher if they can show recurring revenue, such as monthly subscriptions, SaaS subscriptions, or a transaction that consistently occurs. If your business is centered on a subscription based platform and you have high subscription levels, then you can expect keen interest from prospective buyers.

If you want to show a prospective buyer that your business is a good bet, then recurring revenue is a great place to start. Recurring revenue indicates that you have ongoing consumers and that means ongoing revenue. But recurring revenue indicates something else as well, namely, it indicates that your business is providing a consistent service that is consistently in demand.

Take the Pressure Off Buyers

Buyers like predictability. Recurring revenue means that a buyer knows that he or she can buy a business and count on income from day one.

Sellers can often forget that most buyers get nervous when they are making any kind of business buying decision. The power of recurring revenue is, in part, psychological as it allows buyers to realize that there will be revenue no matter what. Even if they do little to develop the business, cash will flow in. In other words, the psychological value of recurring revenue is that it takes much of the pressure off.

Examining Your Annual Recurring Revenue

If your business has a strong annual recurring revenue or “ARR”, then you should place a good deal of focus on this fact. Many feel that a company’s ARR number is a powerful indicator of a company’s overall health.

Ultimately, recurring revenue indicates a great deal about your company. High recurring revenue doesn’t just mean that you have a reliable source of income every period. It indicates that your business is providing a service that is needed and valued. Strong recurring revenues also indicate that your business is doing many things correctly and that your goods and/or services are of such a caliber that you are generating repeat business.

Visibility and Transparency

Savvy buyers also value visibility and transparency. Thanks to this kind of consistent income, it is easier for buyers to plan for and manage future expenses and increase a business’s overall stability.

Part of properly showcasing your business is to emphasize your business’s recurring revenues if they do indeed occur. A seasoned business broker can be an invaluable ally in helping you reveal your business in the best light possible.

Copyright: Business Brokerage Press, Inc.

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M&A Business Advisors represents sellers and buyers of privately owned businesses in a wide range of industries in California and Nevada. Our services include Selling a Business, Buying a Business, Mergers & Acquisitions, Business Sales and Acquisitions, Valuations, Opinion of Value, SBA Finance and Business Consulting. Sell your Business, Buy a Business, How do I determine the Value of a Business, How do I Sell my Business Confidentially, What is a Safe Way to Sell my Business, How long does it take to Sell a Business, How do I Sell a Business in California, How do I Sell a Business in Nevada, Search Businesses for sale. We represent Sellers and Buyers in Southern California, Los Angeles County, Orange County, Ventura County, Santa Barbara County, Kern County, San Bernardino County, Riverside County, San Diego County, Los Angeles, Torrance, Gardena, South Bay, San Fernando Valley, San Gabriel, Upland, Woodland Hills, Chatsworth, North Hollywood, Van Nuys, Burbank, Glendale, Pasadena, Santa Clarita, Palmdale, Thousand Oaks, Ventura, Camarillo, Newport Beach, Irvine, Anaheim, Brea, Northern California, San Jose, San Francisco, Oakland, San Ramon, Napa, Sacramento, Nevada, Northern Nevada, Southern Nevada, Reno, Carson City, Tahoe, Las Vegas.