The buy-side analysts are heavily discounting our recurring revenue because we do not require automatic credit card renewals or long-term contracts. How do we prove the durability of our monthly billing relationships to capture a true recurring multiple?

Question

Tyler Smith · Accepted Answer

Buy-side analysts love to discount recurring revenue when it is not locked in by rigid, multi-year contracts or automatic credit card renewals. To capture a true recurring multiple, you must shift their focus from the legal structure of the contract to the empirical durability of your customer behavior.

Begin by gathering and presenting cohort retention data. Use a regression-based approach or a clean historical database to track your customer cohorts over three to five years. If you can prove that your average client retention rate is ninety percent or higher, even without a formal contract, you demonstrate that your relationship is practically recurring.

Next, show how integrated your service is to your clients' daily operations. If your services or data pipelines are deeply embedded in their systems, the switching costs are incredibly high. Document this operational stickiness. This makes it clear that your revenue is not transactional, but rather highly predictable.

Finally, align this data with your sales process. Show how your team uses a systematic method to onboard and retain clients, proving that your retention is the result of a repeatable, institutionalized process rather than luck. This data-driven evidence forces the buyer to value your revenue as a durable, recurring stream rather than a series of one-off sales.