Recurring revenue
Recurring revenue is the portion of revenue that automatically renews from one period to the next through subscriptions, contracts, or licenses. It offers superior budget predictability compared to transactional revenue and is valued more favorably by investors.
In practice
A franchise network that collects monthly royalties on franchisee revenue has structural recurring revenue. Unlike the entry fee — a one-time collection — royalties create a predictable cash flow that allows planning investments in field support and development. Acquirers typically value recurring revenue at four to eight times its annual value, compared to one to two times for transactional revenue of the same amount.