by Kelly Dies, Soundpoint Consulting
A dollar is a dollar. That’s true. And, all revenue is equal. Right? Well no, not in an investor’s or potential buyer’s eye. So what makes some revenue good and other revenue better?
Recurring revenue is highly desirable because is it known and predictable. The best example of this is an auto-renewal fee or service charge periodically charged directly to a customer’s credit card. Once the initial sale is complete there are no more costs to acquire a customer. The revenue stream is much like an annuity. Continue to provide the goods or services as promised and the revenue keeps coming in.
Great examples of this are insurance premiums and streaming fees. Once customers have decided to purchase the product – and assuming they remain content, they are happy to have their credit card billed automatically.
In contrast, consulting and attorney fees are often one-time in nature. Revenue ceases when the project is complete and the engagement ends.