What makes recurring revenue so attractive to both buyers and sellers? It indicates the potential for growth, positive cash flow, and business stability. How can it benefit you?
Show You’re In Demand
Businesses that can show recurring revenue will have a higher value. Recurring revenue can be in the form of SaaS subscriptions, monthly subscriptions, or a transaction that consistently occurs. A company with high subscription levels can expect a lot of interest from prospective buyers.
Recurring revenue is a great place to start if you want to show a prospective buyer that your business is a good buy. Recurring revenue indicates that you have ongoing clients, which means ongoing revenue. It also indicates that your business is providing a consistent service that is in demand.
Take The Pressure Off Buyers
Buyers like predictability. Recurring revenue lets a buyer know that they can count on income from day one. Buyers get nervous then they are making any kind of business buying decision. Recurring revenue allows buyers to realize that there will be revenue no matter what. Cash will flow in even if they do little to develop the business.
Examining Your Annual Recurring Revenue
A business with strong annual recurring revenue should place a good deal of focus on this fact. A company’s annual recurring revenue is a powerful indicator of a company’s overall health.
Recurring revenue signifies a great deal about your company. It doesn’t just mean that you have a reliable source of income every period. High recurring revenue indicates that your business is providing a needed and valued service. It also shows that you are doing many things correctly. You are generating repeat business because of the quality of your goods and/or services.
Visibility and Transparency
Buyers also value visibility and transparency. This kind of consistent income makes it easier for buyers to plan for and manage future expenses. It also will increase a business’s stability.
If your business has recurring revenues, it is important to emphasize this fact as part of showcasing your business. EBIT Associates can be an invaluable ally in helping you reveal your business in the best light possible.