The Recurring Revenue Bump

In May 2023, Darden, the owner of the Olive Garden restaurant chain, announced it was acquiring Ruth’s Chris, the legendary American steakhouse, for $715 million, implying a valuation of around one times last year’s annual revenue, or about ten times their adjusted EBITDA for 2022. Not bad for a giant company, but Ruth’s Chris’s value was likely hindered by its lack of recurring revenue.

Comparing Ruth’s Chris to another traditional business with recurring revenue demonstrates the power of automatic customers. For instance, Waste Management, a private garbage collection company that disposes of trash for clients through long-term contracts, trades at over three times its annual revenue.

Two companies in traditional industries, have nothing to do with software, yet one trades at one times revenue while the other fetches three.

1. Recurring Revenue: Not Just for Software Companies Anymore
2. A Subscription Program That Goes Beyond Just Discounts
3. Converting Customers into Subscribers

Recurring revenue will make your business more valuable. You don’t have to be in the software business to create an annuity stream. Find out what your customers crave on an ongoing basis, and you will have the raw material for a subscription offering.

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Franne McNeal, MBA Significant Business Results, LLC Significant GPS Small Business Growth Services