Non-recurring Revenue Matters
While the value of any SaaS business is derived from recurring revenue (ARR), do not forsake non-recurring revenue streams. If you do, you’re ignoring free financing and a way to make the product stickier. Non-recurring revenue streams like onboarding fees and installation fees are a fantastic source of cash. Other non-recurring revenue streams such as ongoing services or support are great for staying in touch with the customer, which prevents churn and uncovers upsell opportunities.
Below is data at the time of IPO for the last 73 SaaS companies to determine the appropriate mix of recurring to non-recurring revenue. 27 out of the 73 broke out non-recurring streams. We present the list below to show that some of the largest SaaS success stories derive significant revenue from non-subscriptions sources.
Of the 73 companies, on median and average, 11% and 14% of revenue is derived from non-recurring streams. Note companies like Evercommerce (31%), Qualtrics (27%), Health Catalyst (37%), Informatica (50%), and Zuora (28%) all derive a significant portion of revenue from non-recurring streams, and they all enjoy strong revenue growth and retention.
If you’re generating revenue only from subscriptions, there is revenue you’re leaving behind which can serve as free cash financing and make your product stickier.
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