We do not have a pure SaaS subscription model, but 85 percent of our customers renew every year on annual service agreements. The buyer is calling this re-occurring rather than recurring, trying to discount our multiple. How do we prove our revenue predictability to lock in the higher multiple?

Question

Tyler Smith · Accepted Answer

The debate between recurring and re-occurring revenue is a common battleground during valuation negotiations. Buyers want to classify your revenue as re-occurring to justify a lower, service-business multiple, while you want to command a premium multiple based on predictability.

To win this argument, you must present the data that proves your revenue behaves exactly like a subscription. Do not rely on high-level assertions. Instead, build a customer cohort analysis showing your historical retention rates over the past three to five years. If your net revenue retention rate is consistently above ninety percent, the distinction between recurring and re-occurring becomes purely academic.

Next, show how your sales and operational processes are systematized. In an EOS-run company, your V/TO clearly defines your target market and your proven process. Show the buyer how this process leads to predictable, automated renewals and long-term customer relationships. If your contracts include auto-renew clauses, multi-year terms, or integrated software components that make it difficult for customers to switch, present these as structural barriers to churn.

Ultimately, multiple expansion is driven by predictability and risk reduction. If you can prove that eighty-five percent of your revenue starts the fiscal year already under contract or highly likely to renew based on solid historical cohorts, you have earned the right to demand a premium multiple.