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THOUGHT FOR THE DAY

Recurring Revenue and its affect on Business Value

Recurring Revenue and its affect on Business Value

Feb 21 2017

Increase the Value of Your Business

You're thinking of selling your business and are eager to cash in and be rewarded for all of your hard work you've put in over the years.Often times it is beneficial to build recurring revenue streams into your business model, to increase your business value, in order to net enough from the sale to fund your future plans.Recurring revenue is a key strategy and value driver to any business.

Recurring revenue is a guaranteed revenue for some period of time that does not require the same level of sales and owner effort as one-time revenue. It typically results in much higher profit margins which is always highly coveted by buyers.

Examples of recurring revenue include:

  • Service or maintenance agreements
  • Consumable product or replacement part contracts
  • Subscriptions for products, services, or information
  • Memberships

Because recurring income is stable and predictable it increases value and can help your business weather economic recessions while simplifying business operations. Studies have shown that businesses with recurring revenue sell at much higher multiples than those that don't.

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