Recurring Revenue Models

"Recurring revenue drives up agency valuations." Should agencies chase a recurring revenue model? It depends... Why recurring matters: - Predictable cash flow - Higher lifetime value - Easier planning and hiring Classic models: - Cable subscriptions (pre-streaming, see "Cable Cowboy" on John Malone) - Insurance premiums - Software-as-a-Service How agencies try to copy this: - Monthly or quarterly retainers - Annual or multi-year agreements Structure alone does not create a durable business. Two levers decide real value: - Retention: How much of this year's revenue still shows up next year. - Client concentration: How reliant you are on a few accounts. Examples: - A $10k-per-month “unlimited design” service that loses 80% of customers after four months is just a project shop on a payment plan. - An ad agency with ten annual contracts where two clients make up 65% of revenue is one churn away from trouble. Recurring agreements without recurring behavior equal fragility. 𝗥𝗲-𝗼𝗰𝗰𝘂𝗿𝗿𝗶𝗻𝗴 𝗿𝗲𝘃𝗲𝗻𝘂𝗲: 𝘁𝗵𝗲 𝗾𝘂𝗶𝗲𝘁 𝗮𝗹𝘁𝗲𝗿𝗻𝗮𝘁𝗶𝘃𝗲 Predictable, relationship-driven work that cycles back on a calendar or milestone, no subscription required. Think annual conferences, seasonal campaigns, or each new product launch. The cadence is longer than a monthly retainer, yet the revenue arrives with similar reliability when the relationship is strong. Examples: - An event-activation team hired every year by the same tech giants - A marketing firm that handles each new property launch for long-standing real-estate clients No formal retainers, yet the work and cash keep returning because the partnership sticks. When buyers talk about higher multiples for "recurring" agencies, they really mean the agency's ability to retain client revenue year-to-year. At Barrel Holdings we like seeing 70-80% revenue retention (the share of this year’s client revenue that repeats next year, net of churn and downsells) across two to three years in prospective targets. Agencies in the 80-90% band, combined with low client concentration, earn the premium. Structure revenue however you like; if it doesn’t stick, it will not lift your valuation. == 🟢 Find this helpful? Check out AgencyHabits for more agency insights & also check out our free Net Revenue Retention calculator for agencies.

Don't just book recurring revenue any old way. There's a right and wrong way to do it. Many think ARR and annual run rate are interchangeable. But that's not how the best do it. Instead, proper revenue recognition is critical for valuation. Here are 7 steps that will help you get it right: 1. Understand the difference between booking and recognizing revenue. 2. Calculate ARR based on subscription term, not billings. 3. Don't confuse ARR with annual run rate. 4. Recognize revenue evenly over the subscription term. 5. Ensure your recognition method can withstand due diligence. 6. Train your team on compliant recognition practices. 7. Monitor revenue recognition accuracy every accounting period. You'll know you're doing it right when your SaaS valuation soars. Remember — you're not just booking recurring revenue. You're building a highly valuable SaaS business.

Unlocking New Revenue Streams with SaaS Models A few years ago, I sat across from a startup founder who had built a brilliant product—an AI-powered analytics tool for eCommerce businesses. The problem? They were struggling to scale. Their high upfront costs and one-time licensing fees limited customer acquisition. “We have a great product, but revenue is unpredictable,” he admitted. I’ve seen this challenge time and again—companies with exceptional tech but outdated monetization models. That’s when I asked him, “Have you considered transitioning to SaaS?” Fast forward 18 months, and that same startup saw a 3x increase in revenue, higher customer retention, and expansion into global markets. That’s the power of Software-as-a-Service (SaaS). Why SaaS is Driving Business Growth The SaaS market is projected to reach $908 billion by 2030, growing at a CAGR of 18.7% (Fortune Business Insights). Businesses are increasingly moving away from traditional software licensing to subscription-based, cloud-enabled solutions, unlocking new revenue streams and market opportunities. At Devsinc, we’ve helped numerous clients transition to SaaS, and the benefits are clear: 1- Recurring Revenue Stability: Unlike one-time sales, SaaS provides predictable, subscription-based income. 2- Scalability: SaaS businesses grow exponentially with minimal incremental costs. 3- Global Reach: Cloud-based delivery removes geographic limitations. The Real Impact of SaaS: A Case Study One of our eCommerce clients, initially selling packaged software, struggled with declining sales. We helped them pivot to a SaaS-based model, offering monthly subscriptions and AI-driven customer insights. The results? A 42% increase in customer lifetime value and 60% higher user engagement. The Future of SaaS: AI, Verticalization, and Automation By 2026, 70% of software products will shift to SaaS-based models (Gartner). Emerging trends include: - AI-powered SaaS: Automating workflows and enhancing decision-making. - Industry-Specific SaaS: Tailored solutions for sectors like healthcare, fintech, and retail. - Usage-Based Pricing: Charging customers based on consumption, increasing flexibility. Building a Successful SaaS Business Transitioning to SaaS isn’t just about moving to the cloud—it’s about redefining how value is delivered. Companies that invest in customer-centric experiences, seamless onboarding, and continuous product evolution will lead the market. The conversation with that founder wasn’t just about switching business models—it was about embracing a new mindset. SaaS is more than software; it’s a strategy for sustained, scalable growth. For companies looking to unlock new revenue streams, the question isn’t whether to adopt SaaS—it’s how quickly they can adapt. The future belongs to those who can innovate, iterate, and deliver continuous value. Are you ready to make the shift? #SaaS #BusinessGrowth #RecurringRevenue #TechInnovation #DigitalTransformation

Is your business's model based on recurring revenue from subscriptions? And have you experienced the magic of ARR, Automatic…. Hem Annual Recurring Revenue? That's great, but you may have noticed a churn spike lately. Or maybe it's getting tougher to bring new customers on board? If so, it's time to face it: subscription fatigue might be creeping into your customer base. In "The Dream of Recurrent Revenue and the Reality of Subscription Fatigue," we dissect this complex issue that's causing subscription models to re-think themselves: how do we bridge the gap between recurrent revenue and recurrent value? How do we stop our valued subscribers from clicking the dreaded cancel button? The article takes a critical look at three key subscription areas feeling the heat: 💣 Fragmented services, struggling with an increased Total Cost of Subscription 💣 E-commerce subscriptions grappling with shifting consumer habits 💣 Digital goods where the subscription model might not be the perfect fit Actionable solutions are on the table, and we look in detail at some tools you can leverage now, including : ✅ Usage-based pricing models to align closer with customer usage patterns. ✅ Debundling services to offer transparent value and curb decision fatigue. ✅ Differentiation through new pricing models. Read the full article now and start looking at your recurrent revenue with the eyes of your customers! 🎙 No time to read the full article? Try the Podcast Episode instead on https://lnkd.in/eAEZFFwT or on your preferred streaming platform 👉 I write about subscription models, product pricing, e-commerce/marketplaces, and creating top product organizations. Follow me to receive my updates and articles! #pricing #pricingstrategy #subscriptions #revenuemanagement #productmanagement

Every dollar counts, but predictable dollars count more. That's the mantra of recurring income, a game-changer in e-commerce. The real growth lies in mastering recurring revenue, yet many e-commerce businesses overlook this. Think about it – consistent, predictable income every month. It's a business dream! Let's take a peek at the beauty industry. A prominent cosmetics brand transformed its business by shifting from one-time purchases to a monthly subscription model. The result? A whopping 30% increase in steady income in just six months! This isn't an isolated success. Many are doing it, and it's high time you consider it too. Here’s how to start: 1. Identify consumable products or services in your portfolio. 2. Offer a subscription model with incentives – think discounts or exclusive perks. 3. Ensure your e-commerce platform supports recurring billing and subscriptions. 4. Promote your subscription model aggressively. Use it as an upsell to every purchase. 5. Monitor metrics like churn rate and average subscription revenue to fine-tune your strategy. Remember, it's about creating value that keeps customers coming back. A subscriber today is a stable income tomorrow. E-commerce is evolving, and so should your strategy. Don't just sell products; sell experiences that customers want to be part of month after month. Dive into recurring income and watch your business stability soar. Unsure where to start? I share weekly insights on building sustainable e-commerce models. 🔄 Think this could be a game-changer for your business? Reshare and follow me, Irina Poddubnaia and TrackMage for more insights into innovative e-commerce strategies. #digitalmarketing #Entrepreneurship #advertisingandmarketing #sustainability #Ecommerce #BusinessGrowth