Recurring revenue sounds pretty straightforward; from the word “recurring”. It gives the impression of something happening over and over again. Now, that sounds good, right? I mean, more revenue equals more success.<\/p>\n\n\n\n
Yes, that’s right. Recurring revenue has several benefits and helps a company in several ways, most importantly with the predictability and stability that it offers. It is an effective model that businesses and organizations use when providing products and services. However, it isn’t limited to these alone.<\/p>\n\n\n\n
In this article, I will go in-depth to explain what recurring revenue means, as well as its models and the benefits it offers.<\/p>\n\n\n\n
\nKey takeaways<\/p>\n\n\n\n
Companies and organisations have several methods of generating revenues, from predictable sales at consistent intervals to one-off transactions.<\/p>\n\n\n\n
Recurring revenue comprises the stable, predictable and regular sales. They always come in at regular intervals and so can be expected with some degree of assurance. <\/p>\n\n\n\n
A company running a recurring revenue model primarily generates its revenues from such recurring sales.<\/p>\n\n\n\n
It\u2019s worth remembering however, that recurring revenues may stop at any time despite its typical regularity.<\/p>\n<\/blockquote>\n\n\n\n
What is recurring revenue?<\/strong><\/span><\/h2>\n\n\n\n
Recurring revenue is the income a company earns continuously and can expect to earn regularly. Recurring revenue often comes from subscription-based services and sometimes from recurring sales of special accessory items necessary for an initial product purchase. When businesses and organizations rely on predicted cash flows regularly, they use a recurring revenue model to outline the products and services necessary for recurring sales.<\/p>\n\n\n\n
Recurring revenue represents the stable, predictable and regular segment of a business\u2019s revenue. This is in contrast to one-off sales as the gist of a recurring revenue is that certain sales are guaranteed at specific intervals.<\/p>\n\n\n\n
Businesses, investors and analysts pay particular attention to a company\u2019s revenue, also known as its top line, recorded on the income statement. The top line determines the bottom line or profit, since all expenses and taxes are subtracted from revenues to get net income. <\/p>\n\n\n\n
On the opposite side of the spectrum is the one-time revenue model, which is based on single, non-recurring payments that may or may not happen again. One-time sales can have a higher sense of immediacy and closure compared to recurring revenue<\/p>\n\n\n\n
With non-recurring revenue, it\u2019s harder for businesses to forecast and plan for the future. They don\u2019t have as much certainty as a recurring revenue model. With a one-time purchase, you don\u2019t know when new customers are going to make another purchase, or even if they\u2019re likely to purchase again.<\/p>\n\n\n\n