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Last Updated on: July 25, 2020 by Joseph Muriithi
Everybody in the business industry loves the power of recurring revenue, sellers and buyers alike. Recurring revenue is a perfect indicator of positive cash flow, a signal that portrays the potential for growth, sustainability, success, and overall business stability. These factors make recurring revenue an attractive factor to sellers and buyers. Recurring revenues can benefit you and your business in the following ways.
Businesses in various industries are valued higher if evidence of recurring revenue is present. Having a business that can actually show recurring revenues such as active subscriptions, recurrent customers for a long period of time, long-term projects underway and frequent customer/ client request are deemed valuable and prospective buyers will show genuine interest in your business.
Repeating revenues puts across the message that you have actual consumers who support ongoing income generation. Showing a prospective buyer that your business has the potential of recurring revenue will increase the odds in your favor. Alongside indicating that you have ongoing sales to support your business, recurring revenues also show that your business has been offering a product or service the right way and that demand is consistent. These factors build up to the fact that your business is headed in the right direction and the operations have been optimized for success.
Build Buyer Confidence
Buyers will at most times follow their guts and there is no better way to influence their guts than evidence of positive business productivity. Recurring revenue shows the buyer that they can go ahead with a business transaction and count on success from the word go. When buyers consider settling for a business buy, nervousness may take the best of them and an assurance of revenue happens to be a remedy. Knowing that even if they made little to no effort to develop the business it would still bring in revenue, buyers will feel comfortable with the deal on the table and increase the chances of closing a deal that is favorable to you as a seller.
The fact that you can be in a position to showcase the merits of your recurring revenue build transparency. With repeating revenue, buyers find it suitable and helpful during management and planning for future expenses, determining financial growth projections and viability of the business in the long run. The ability to show this just increases the buyer’s stability in their decisions and confidence in the business and will, without hesitation fork out the purchase price and close the deal.
Recurring revenue is a perfect indicator of positive cash flow, a signal that portrays the potential for growth, sustainability, success, and overall business stability.
Know your Recurring Revenue Metrics
If your business has the power of repeating revenue, it is vital that you examine it closely and determine how healthy it is. Healthy recurring revenue is a powerful indicator of a business health and overall potential. High recurring revenue portrays a great deal about your business. Apart from indicating that your business is providing a product or service that is valuable and in demand, recurring revenue also shows that a great deal of time and resources has been laid down to develop a business structure that delivers exceptionally in matters of operation, customer service, and marketing, in short, your business has aligned itself strategically.
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