recurringrevenue

Recurring revenue is the portion of a company's revenue generated from ongoing customer relationships that provide predictable, recurring income over time. It typically arises from subscription, membership, or service contracts where customers pay regular fees, rather than one-off purchases. This model offers greater revenue visibility and forecasting reliability and is common in software as a service, telecommunications, media streaming, and other service industries.

Common recurring-revenue models include subscription-based plans with monthly or annual fees, usage-based plans with a recurring base fee plus variable charges, maintenance or support contracts, and automatic renewal arrangements. Firms may also monetize licenses with ongoing updates, upgrades, or tiered pricing.

Key metrics include monthly recurring revenue (MRR) and annual recurring revenue (ARR), churn rate, expansion revenue, and net revenue retention. A growing MRR or ARR with stable or improving churn indicates a durable revenue base. Businesses often track customer acquisition costs, lifetime value, and retention strategies to sustain recurring revenue.

Benefits include smoother cash flow, easier long-term planning, and potential for scalable growth, which can enhance enterprise value. Risks involve customer attrition, price sensitivity, long renewal cycles, and reliance on a relatively small customer base. Success in recurring revenue models typically depends on effective onboarding, ongoing customer success, clear value propositions, and well-structured pricing and tiers.

In accounting, recurring revenue is recognized over time as services are delivered, aligning with accrual principles. See also: subscription business, churn, customer lifetime value.