Glossary Term
Recurring Revenue
Definition
Recurring revenue is a predictable, stable income stream that a company generates from its ongoing operations, typically through subscription models, service contracts, or the sale of consumables. In contrast to one-time sales, recurring revenue is earned at regular intervals, such as monthly or annually, providing a more reliable and sustainable source of income. For medical device companies, recurring revenue often comes from service agreements, the sale of consumable products, or subscription-based software and monitoring services.
Relevance to the MedTech Industry
Recurring revenue provides businesses with a predictable and stable income that helps to cover operating costs, fund growth initiatives, and reduce the reliance on one-time sales. It enables companies to plan for long-term financial stability and fosters strong, ongoing relationships with customers. In the medical device industry, recurring revenue allows companies to generate cash flow even after the initial sale of a product, making it an important financial strategy for long-term success.
Additional Information & Related Terms
Related Terms
Subscription Model: A business model in which customers pay for continuous access to a product or service, generating recurring revenue for the company.
Consumables: Products that are used up during normal operation of a medical device and need to be replaced regularly, such as test strips or surgical tools.
Service Agreement: A contract that guarantees the provision of ongoing maintenance, support, and updates for medical devices, often generating recurring revenue.
Software-as-a-Service (SaaS): A model in which software is provided on a subscription basis, offering recurring revenue through regular payments for access to cloud-based services.
Customer Retention: The practice of ensuring that existing customers continue to use a product or service, which is essential for maintaining a steady stream of recurring revenue.