We do not have contractual SaaS-style subscriptions, but we have a ninety percent repeat purchase rate from auto-replenishing accounts. How do we get a buyer to value this as recurring revenue instead of applying a lower capitalization of earnings multiple?

Question

Tyler Smith · Accepted Answer

To secure a recurring revenue multiple without formal SaaS contracts, you must prove that your repeat purchases are systematic rather than accidental. Buyers apply lower multiples to transactional businesses because they fear revenue will evaporate the moment the founder exits. You must remove this fear by documenting the structural stickiness of your customer relationships.

First, provide a cohort analysis showing the lifetime value and retention rates of your auto-replenishing accounts over a multi-year period. Prove that your customer acquisition costs are recovered multiple times over. This data changes the narrative from one-time transactional sales to highly predictable cash flows.

Second, demonstrate that your customer retention is driven by operational systems, not individual relationships. Show them your EOS Accountability Chart, which clearly defines who is responsible for customer success and account management. This proves to the buyer that your retention is institutionalized.

We recommend structuring the deal to include a short-term transition framework that links a portion of the valuation to account retention over the first twelve months. By combining hard cohort data with proof of a self-sustaining operating model, you can confidently argue for a valuation based on a recurring revenue multiple rather than a discounted capitalization of historical earnings.