Recurring revenue

[ri-kur-ing rev-uhn-yoo]

Noun

Revenue that an individual or company receives on a regular basis and at fixed intervals, as opposed to in lump sums. Two common forms of recurring revenue are monthly recurring revenue (MRR) and annual recurring revenue (ARR), depending on the cadence with which funds are distributed. Both are common metrics that SaaS companies use to track how much revenue they’re earning.

In addition, reseller partners will often receive recurring revenue from software vendors if they sell a subscription on their behalf. For example, if a value-added reseller (VAR) partner sells a software subscription to a new customer, the software vendor may reward the partner with a 20% of the MRR the company receives from that customer each month. 

This mutually beneficial arrangement also incentivizes the reseller to help keep the customer happy because the longer they keep renewing their subscription, the more passive income the partner will earn. Companies benefit massively from this, as it takes some strain away from their customer support and customer success functions.

Also see: Reseller partners.

Example: The CEO was thrilled to see annual recurring revenue increase nearly 20% after the product marketing team rolled out a pricing update.

Example: As a small agency, X-Factor Marketing was eager to add sources of recurring revenue through partnerships to offset some of the instability of their project-based fee structure.