Peter Vander Wall explains why recurring revenue (predictable monthly payments like subscriptions) can double your firm's value compared to reoccurring revenue (repeat business that's less certain). A firm with $83,000 a month in recurring revenue commands a higher sale price because buyers pay a premium for that predictability.
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$83,000 a month
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If you had a million dollar accounting firm and a million dollar accounting firm and one was all recurring $83,000 a month, and one was not recurring, like, the one that is recurring will sell for way more money. There's recurring revenue, there's reoccurring revenue. So people are like, what the hell is the difference? Well, recurring revenue is like cash comes in every month and it hits the first of the month or the end of the month. So that'd be like if you had Diet Coke ordered on Amazon prime and it just showed up to your doorstep every single week. Right. Reoccurring revenue is revenue that you plan on it being there because they've been a client for however many years. You don't have a guarantee of when it's actually going to get there because a lot of it's dependent on the client. But reoccurring revenue is like, hey, every time you go to the grocery store, you're going to buy a case of Diet Coke. But not all the time. Maybe you forget. So that's the difference between like recurring and reoccurring revenue. And the more like recurring revenue that you can get when you buy a business, the better that's going to be of a deal. But you're probably going to have to pay a little bit more.
