What is Recurring Revenue?
Definition
Income that a business can reliably expect to receive at regular intervals from active subscriptions.
Understanding Recurring Revenue
Recurring revenue is the financial foundation of subscription businesses. Unlike one-time sales, recurring revenue is predictable and compounds over time as new subscribers are added. This predictability enables better planning, easier fundraising, and higher business valuations.
Recurring revenue is measured as MRR (Monthly Recurring Revenue) or ARR (Annual Recurring Revenue). The predictable nature of recurring revenue is why subscription businesses are valued at 5-15x revenue, compared to 1-3x for traditional businesses. For personal finance, your total recurring expenses represent your personal recurring cost.
Related Terms
MRR
Monthly Recurring Revenue — the predictable total revenue a subscription business expects to earn each month from all active subscriptions.
ARR
Annual Recurring Revenue — the annualized value of recurring subscription revenue, calculated as MRR multiplied by 12.
Subscription
A recurring payment arrangement where a customer pays at regular intervals to access a product or service.
Recurring Billing
An automatic payment system that charges a customer at predetermined intervals for ongoing access to a product or service.