Same Million Dollars. Very Different Million Dollars.

Two businesses can make the same $1 million and be worth very different amounts.

The first starts every month at zero. New leads. New proposals. New projects. New sales. Then next month? Start over.

The second begins the month with customers already under contract. Retainers. Maintenance agreements. Recurring services. Renewals.

Same $1 million. Very different $1 million.

Buckets versus pipeline

Think of it like carrying buckets of water versus building a pipeline. Both deliver water. But with the bucket, you make another trip every time you need more. The pipeline keeps delivering.

Predictable revenue makes it easier to plan, hire, invest and weather a slow month. It can also make the business more attractive to lenders and buyers because they're not simply hoping yesterday's sales can be recreated tomorrow.

But recurring still has to be profitable

A $10,000 customer isn't very impressive if it costs $9,000 to serve them. So I want to know three things:

• How much comes back?
• How much do we keep?
• How much depends on the owner?

Those three questions tell you a lot about the quality of your revenue.

I've seen businesses transform their economics by turning one-time projects into retainers, maintenance agreements and recurring service contracts. Instead of finishing a job and asking "Where do we find the next customer?" some of that revenue is already scheduled to return.

Not simply more revenue. Better revenue. Revenue you can see coming.

A question worth asking

If you stopped selling for 30 days, how much revenue would still come through the door?

If the answer makes you uncomfortable, look at what you already sell. What could become a retainer, subscription, maintenance agreement, service contract or renewal? Pick one and spend the next 90 days building the pipeline.

From Chapter 4 of The CFO Operating System — Value Driver: Revenue Quality.