Recurring revenue earns a multiple premium, and everybody knows it earns a multiple premium, which is why almost everything now gets described as recurring.
Most of it is not. The word has been stretched to cover three quite different things, and only one of them is worth what a buyer pays for it.
Repeat is not recurring
A client who buys every year because they always have is repeat revenue. It is real, it is valuable, and it is not recurring.
Recurring means there is a mechanism holding the revenue in place — a contract, an auto-renewal, a system the client has built their own work around, a cost to leaving. Repeat means there is a habit. Habits are broken by a bad quarter, a new procurement officer, or a competitor who calls at the right moment.
The distinction is invisible in a revenue schedule. Both look like the same client appearing every year.
The contract that is really a thirty-day contract
A three-year agreement that either side can cancel on thirty days' notice is a thirty-day agreement with optimistic paperwork.
This is the most common version of the problem and the easiest to check. Read the termination clause before the term clause. The term tells you what the seller wants you to see; the termination clause tells you what the client can actually do.
Auto-renewal is worth something, but only in proportion to how hard it is to opt out. An auto-renewal with a ninety-day written notice window is a real barrier. One that renews unless the client says otherwise, with no notice period, is a formality.
The retainer that is a project in instalments
Retainers are the hardest of the three to see through, because the payment pattern looks exactly like recurring revenue. Same amount, same day, every month.
The question is what the retainer is buying. If it funds an ongoing relationship — availability, advice, a standing role — it recurs. If it funds a defined piece of work being paid for in twelve parts, it ends when the work ends, and the revenue schedule will not tell you which one you are looking at.
The check: for each retainer client, what happens in month thirteen. If nobody can describe month thirteen, there is not one.
The test
For every line described as recurring, ask what has to happen for it to stop.
If the answer names a mechanism — a notice period, a contract term, a system they would have to migrate off — it is recurring, and it should be priced that way. If the answer is that the client simply stops, it is repeat revenue with better marketing, and the premium belongs to somebody else.