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Recurring Revenue: Why It Impacts The Value Of Your Business

Paul Dodgshon of Uscita, Business Broker and Certified Value Builder, specialises in increasing company value.

When it comes to the value of your business, what happens in the future is more important than what happened in the past. One of the best ways you can shape the future of your business therefore is to create some recurring revenue - those magical sales you make without really trying. Good examples of recurring revenue models include ongoing service contracts, subscriptions, and memberships – basically any sale situation the customer has to proactively opt out of, instead of in to. Recurring revenue is critical for the value of any small business, and it is equally important for the world’s largest businesses.

Think like Amazon. By June 2015, Amazon Prime had become a £500m business in it’s own right for Amazon, with more than 10 million subscribers the world over. Even more interesting, is what Prime did to the buying behaviour of its members. Eager to get their money back from the upfront subscription fee, they purchased a bigger and broader array of products from Amazon, spending almost three times more per year than non-members.

Think about yourself as an investor looking at your own business for a second. Wouldn’t it be great if revenues and cash flow were predictable?

One of the biggest factors in determining the value of a company is whether an acquirer can see where sales will come from. Not in the past, not even in the present, but in the future. Proving the certainty of your future revenue becomes key. New metrics such as attrition rates and average contract length are required and these are all part of the new mathematics of business.

So if you don’t have a recurring revenue stream, consider how best to create one given your type of business. I would contend there is at least one suitable model for every business, if you know where to look. Every day, Uscita helps clients develop: Predictable, recurring sales revenues. A secure, loyal customer base. More predictable cash flow and forecasting. A calmer life, reducing reliance on continuously finding new customers. Uscita has produced a guide which covers Recurring Revenue along with 7 other key drivers that can improve the value of your business. To download your free copy of this guide, please click on the link below. 8 Key Ways to Add Value to Your Business 01606 535 020 www.uscita.co.uk

This was posted in Bdaily's Members' News section by Esther Higgs .