Transition Planning - (Sellers/Second Edition)

HOW TO BUILD RECURRING REVENUE:
A KEY TO A VALUABLE BUSINESS
Recurring revenue is the Holy Grail for business owners looking to have
a valuable and desirable company.
A customer base with a subset of recurring revenue that is contractual
and repeating in nature increases the probability that the business will
have stable, predictable revenues and cash flow into the future.
From a buyer’s perspective, this reduces future risk and therefore
enhances perceived value. The value associated with acquiring the
available cash flow is directly related to risk.
Although all recurring revenue will have a positive impact on business
value, some forms are more desirable than others. Here is a list of the
types of recurring revenue in an order from good to best:
CONSUMABLES
If you sell a consumable product, whether it is diapers, commercial
cleaning supplies, or office supplies, start tracking your repurchase rate
from existing customers. This will be a number that buyers will use to
calculate your projected sales into the future — and to calculate how
much they’re willing to pay to buy your company today.
“
Recurring revenue is the Holy Grail
for business owners looking to have a
valuable and desirable company.
- Rose Stabler
“
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TRANSITION PLANNING GUIDE