🟠 The Revenue Ladder: From Best to Worst Sources of Income

Not all revenue is created equal. Some revenue streams are rock-solid and predictable, while others are completely unpredictable and one-time only. If you’re building or acquiring a business, understanding the difference can make or break your long-term success.

Let’s break it down from the gold standard (contracted, predictable revenue) to the least valuable (one-time, transactional sales)—with real-world business examples to bring each category to life.

Before we get started, I want to tell you about a webinar I’m hosting tomorrow (Thursday)

🔒 The Best: Contracted & Predictable Revenue

1️⃣ Multi-Year Recurring Contracts (The Ultimate Stability)

• Example: An MSP (Managed Service Provider) signs a 3-year IT support contract with a law firm, guaranteeing monthly payments regardless of service usage. My company DataTel typically does 3-5 year contracts with our clients, which means I have reliability and stability years into the future. This is one of the more compelling reasons why I thought it was an incredible business when I acquired it.

• Why It’s Great: Predictable cash flow, high customer retention, and strong business valuation.

2️⃣ Annual Recurring Revenue (ARR) (Locked In for the Year)

• Example: A cybersecurity company sells annual software licenses for endpoint protection, ensuring renewal revenue every year.

• Why It’s Great: Clients commit for a full year, minimizing churn and maximizing upfront payments.

3️⃣ Monthly Recurring Revenue (MRR) (Steady, Monthly Growth)

• Example: A VoIP provider charges businesses a monthly fee per phone line, creating a continuous revenue stream.

• Why It’s Great: Steady cash flow with monthly billing, though clients could cancel at any time.

🔄 The Middle Ground: Semi-Recurring & Reoccurring Revenue

4️⃣ Reoccurring Revenue (Non-Contracted but Predictable)

• Example: A commercial cleaning company provides bi-weekly office cleaning without a formal contract—customers stay out of habit. An HVAC company is another example who has customers call on average once per year to fix an issue.

• Why It’s Decent: Regular customers, but they could leave at any time. Can be lumpy.

5️⃣ Usage-Based Revenue (Consumption Model)

• Example: A cloud hosting provider bills businesses based on data usage—higher demand means higher invoices.

• Why It’s Decent: Upside potential, but less predictable than fixed contracts.

6️⃣ Retainer-Based Revenue

• Example: A digital marketing agency charges clients a $5,000/month retainer for consulting, but hours aren’t guaranteed to be used.

• Why It’s Decent: Predictable revenue, but clients may reduce or cancel over time.

7️⃣ Project-Based Revenue (High Frequency)

• Example: An electrical contractor regularly installs new circuits for a growing chain of restaurants—not contracted, but expected.

• Why It’s Decent: Work is consistent but depends on the client’s expansion plans.

⏳ The Worst: Less Predictable, One-Time Revenue

8️⃣ Project-Based Revenue (Low Frequency)

• Example: A road paving company that sells to the governement wins a big job every few years.

• Why It’s Risky: Large, high-value projects but inconsistent timing and frequency.

9️⃣ One-Time Product Sales

• Example: A B2B hardware reseller sells servers and workstations but has no service contracts attached. Most of E-commerce is like this.

• Why It’s Risky: Revenue depends on constant new sales, with no guarantee of repeat customers.

Journey over destination,

The SMB Scoop 

Ben Tiggelaar

Things I’m currently working on: www.bardocapital.com, www.smbjunction.com, www.datatelco.com, www.mspowner.com