We transition customers from one-time onboarding setups to recurring subscription plans, but the buyer's Quality of Earnings firm is treating our initial onboarding fees as non-recurring revenue. How do we defend the lifetime value and recurring nature of these integration fees?

Question

Tyler Smith · Accepted Answer

Buy-side Quality of Earnings teams are paid to find reasons to discount your EBITDA. One of their favorite tactics is to strip out onboarding, setup, or implementation fees, labeling them as one-time transactional events. If they succeed, your recurring revenue percentage drops, and your multiple shrinks.

To defend these fees, you must prove they are an intrinsic, predictable part of your customer acquisition and retention cycle. Look at your historical data. If every new contract requires a setup fee, and your customer pipeline is highly consistent, those fees are not one-time anomalies. They are a recurring operational cash flow.

Use the IVS 105 income approach to tie these onboarding fees directly to customer lifetime value. Show that customers who pay the setup fee have lower churn and longer contract terms. This proves the setup fee is not a random transaction, but the entry point to a multi-year, high-margin relationship.

Align your leadership team to document this customer journey. Present a clean cohort analysis that demonstrates the predictable volume of onboarding revenue year over year. If you can show that onboarding fees consistently represent a steady, predictable percentage of your annual revenue, you can successfully argue to keep them inside your recurring EBITDA calculations.