What it is:
Recurring revenue is
How it works (Example):
Let's assume Company XYZ sells a widget-cleaning service. Its customers sign three-year contracts agreeing to spend $50 a month on widget cleaning. The future revenue from these contracts to come at regular intervals (monthly), and it has a reasonable expectation that the indeed materialize (because it has legal contracts with the customers).associated with these contracts is called recurring revenue -- the company expects the
Why it Matters:
Recurring revenue makes a company more stable and predictable both operationally and financially. This in turn lowers the risk associated with a company's operations, though a hiccup in sales can easily reduce this sense of security.