Recurring revenue is income received from a regular provision of services, such as rental, licensing, cleaning services, managing of assets, magazine subscriptions, web content subscription, SaaS, and so on. This type of revenue is usually repeated on a monthly or annual basis. The amount usually does not change much and is automatically withdrawn from the customer (from a credit card, PayPal account, debit card, etc.).
How are recurring revenues perceived from the business perspective?
There are two big advantages: distribution of recurring revenues over time and a relative ease of planning of such revenues. The opposite is project-based revenue that are spasmodic and cannot be planned so easily. Recurring revenues bring a certain degree of certainty and stability in cash-flow. They can only result from certain product types, typically from services that are consumed repeatedly and paid for on a monthly or annual basis.
How do we measure recurring revenues?
Financial indicators measure recurring revenues on a monthly or yearly basis:
- Monthly Recurring Revenue (MRR)
- Annual Recurring Revenue (ARR)