We have a high volume of monthly recurring revenue but our customers are on month-to-month contracts with no long-term commitment. How do we prove to a buyer that our customer base is sticky and deserves a recurring multiple?

Question

Tyler Smith · Accepted Answer

Buyers are naturally skeptical of month-to-month revenue because they fear immediate churn post-close. To command a premium recurring multiple, you must shift the conversation from the legal duration of your contracts to the historical behavior of your customers.

Under IVS 105 and the Income Approach, the value of an asset is based on the expectation of future economic benefits. You must build a quantitative defense that proves your month-to-month revenue is just as sticky as contractual revenue.

First, present a detailed cohort analysis. Break down your historical customer data to show the average lifetime value and annual retention rates of your accounts. If your average customer stays for four years despite having a monthly opt-out, the data proves that your service is highly sticky.

Second, use the Trust Equation to demonstrate the depth of your client relationships. Prove that your customer-facing team members fully GWC, meaning they Get, Want, and have the Capacity for, their roles. This alignment ensures customer satisfaction is systemic rather than dependent on the owner.

Third, highlight your recurring operational processes in your Level 10 Meetings. Show the buyer how you track customer satisfaction and resolve service issues before they turn into churn.

By presenting robust historical retention data and a systematic approach to customer success, you can neutralize the buyer's objections. This data-driven approach positions your month-to-month revenue as a highly predictable, recurring stream that deserves a premium multiple.