We have high customer retention but do not use SaaS subscription agreements. How do we prove to a buyer that our repeat transactional revenue behaves exactly like recurring revenue to secure a higher multiple?

Question

Tyler Smith · Accepted Answer

Buyers love recurring revenue because of its predictability, but you do not need a software-as-a-service model to achieve a premium multiple. If you have high customer retention with recurring transactions, you can prove the defensive nature of your revenue through clean data. Start by analyzing your customer cohort data over the last three to five years. Calculate your net revenue retention and gross revenue retention rates. If your customers consistently purchase from you year after year without a formal contract, your revenue is practically recurring. Under the IVS 105 Income Approach, you can present this cohort stability to justify a lower discount rate on your future cash flows, which directly increases your valuation. Use your EOS Scorecard data and customer metrics to demonstrate the predictability of these transactions. Show the buyer that your customer acquisition cost is low because your existing base provides a steady stream of repeat business. Highlight your service-level agreements or long-term partnerships that, while not structured as monthly subscriptions, create high switching costs for your clients. By presenting a quantitative regression-based view of your historical transaction patterns, you can demonstrate that your revenue behaves exactly like a contract-backed subscription. This shifts the conversation from a basic transactional multiple to a premium recurring revenue multiple, forcing the buyer to pay for the true lifetime value of your customer base.