Glossary · Finance
What is Recurring Revenue?
Definition
Recurring revenue is income that repeats automatically or predictably, such as subscriptions, memberships, retainers, and service contracts.
Why it matters
Predictable income lowers stress and makes planning easier. It also tends to increase what a business is worth if you ever sell it.
A lawn care company that sells only one-off mowing earns whatever the week brings. If it signs 40 customers to a $120 monthly seasonal plan, it locks in $4,800 a month for roughly eight months, or $38,400, before the first cut of the year.
Recurring revenue is not guaranteed, as customers can cancel, so keep watching churn. Look for ways to convert repeat purchases into a plan, a membership, or a scheduled service.
Common mistakes
- !Treating recurring revenue as permanent and ignoring cancellations.
- !Locking customers in with confusing terms that cause chargebacks and complaints.
Frequently asked questions
What is Recurring Revenue?
Recurring revenue is income that repeats automatically or predictably, such as subscriptions, memberships, retainers, and service contracts.
What mistakes do beginners make with Recurring Revenue?
Treating recurring revenue as permanent and ignoring cancellations. Locking customers in with confusing terms that cause chargebacks and complaints.
Related terms