Recurring Revenue Share and the Band Worth Holding

Why this matters

Most shops treat this figure as a scoreboard where higher is better, and it is not. A shop sitting too low starts every month at zero and treats its slow season as an emergency it did not see coming. A shop sitting too high has usually stopped selling new work without noticing, because the schedule fills itself and nobody has had to pick up the phone in two years. Both failures show up in the same number, moving in opposite directions, and both are visible a year before they hurt.

What the figure is actually counting

Of the money collected on paid invoices inside the window, the share traceable to a job that a recurring schedule generated, measured against everything else collected in that same window. Three details in that sentence decide what the number can tell you.

It is anchored to collection, not to completion. The window catches money that arrived, so work performed in the last weeks of the window and not yet paid sits outside it. On a trailing twelve months that barely matters. On a single month it matters enormously, which is the first reason to read this on a year rather than a month.

An invoice counts as recurring if any job on it came from a schedule. Not most of it, not the majority of its value. One plan visit on a four-line invoice makes the whole invoice recurring.

A plan visit that bills at zero contributes nothing. Where the plan is sold as a prepaid annual fee and the visits themselves are billed at nothing, those visits never reach the numerator, so a heavily committed shop can read low. Those same visits also drag per-job cost averages downward, which is a separate trap owned elsewhere (see related below).

Two readings hide inside one figure

The any-job rule means the number answers "revenue the schedule touched", and most shops read it as "revenue the schedule guarantees". Those are different quantities and the gap between them is often large.

Take a shop whose trailing-twelve-month figure reads 75 percent of collected revenue. Pull the recurring-flagged invoices apart and suppose invoices that carried a repair line found during the plan visit account for 40 percent of that recurring-flagged money, and on those invoices the plan line itself is about a quarter of the invoice value. Then of the 75 points of the total, 30 points come from mixed invoices and 45 points from plan work alone. Of those 30 mixed points, a quarter, or 7.5 points, is plan work and 22.5 points is found repair work. The schedule-guaranteed figure is 45 plus 7.5, so about 53 percent of collected revenue, against a touched figure of 75 percent of the same collected revenue.

Neither number is wrong. Found repair work is real revenue that only existed because somebody was standing in that basement, and a shop that ignores it will undervalue its plan programme badly. But the two answer different questions. Ask which work survives a bad quarter and you need the 53. Ask what the programme is worth as a business line and you want the 75.

Read it on a year, and check the jobs actually carry their link

Two things will make this figure lie to you before you ever get to interpreting it.

The first is the window. Because the numerator and the denominator are both collections inside the window, and because plan visits cluster into pre-season pushes while demand work clusters into the season itself, a single month can swing the share by more than any real change ever will. The low-share shop described below reads 8 percent on a trailing twelve months and around 20 percent across its trough quarter, because that quarter carries roughly a tenth of the year's collections while the plan visits scheduled into it do not shrink with the season: a quarter of the year's 8 units of plan revenue lands inside a quarter holding 10 units of collections, so 2 over 10. Neither figure is wrong and only one is a description of the business. Read the trailing twelve months for the health question and a rolling three months only to catch a trend early, and never compare a month to a month a year apart as if the difference were a result.

The second is entry discipline. A job only lands in the numerator if it carries a link back to the schedule that generated it. A plan visit that somebody created by hand, because the customer called to move it or because the schedule was set up after the customer signed, is a plan visit the figure counts as demand work. That is the same class of defect the renewal-rate card covers on agreements, and it is worth spot-checking the same way: take twenty plan customers, count their visits in the last year, and compare that total against the recurring job count the records report for them. A gap of more than about one visit in twenty means the flag is under-reporting and the share is understated across the board.

The band, and why both ends are a problem

A common starting point, measured on a trailing twelve months of collected revenue rather than on a month, is a quarter to about 40 percent. Tune it to your trade: a round-based trade where nearly every customer is on a weekly or fortnightly schedule will sit far above that band legitimately, and a trade doing mostly one-time installation work will sit far below it and be perfectly healthy. The band is worth holding in a trade that does both kinds of work, which is most of them.

Below the band, the business has no floor. Above it, the business has no pipeline. Those are not the same illness with the sign flipped, and they are diagnosed differently.

Too little: the trough becomes a cliff

A shop whose work peaks twice a year reads 8 percent of trailing-twelve-month collected revenue as recurring. Their two peak quarters together carry roughly 70 percent of the year's collections and the trough quarter carries about 10 percent of it.

The number that matters is not the 8 percent, it is what the 8 percent buys them in the trough. Going into that quarter they had three weeks of booked crew time against a thirteen-week quarter, and two of those three weeks were plan visits. So the recurring base is holding up two thirteenths of the quarter, roughly 15 percent of the available crew time, and the other eleven weeks have to be sold from a standing start in the worst selling weather of the year.

That is the correct way to read a low share: convert it into booked time in your worst window, because a percentage of annual revenue does not tell you whether payroll is covered in February. A shop that reads 8 percent and shrugs is reading it as an annual average. A shop that reads it as two of thirteen weeks starts selling plans in October.

Too much: the pipeline died quietly

The opposite shop is harder to catch because every number that usually signals trouble looks fine. Over two years their recurring collections grew by about 90 percent while their one-off collections fell to about 0.55 of their level two years earlier. Index the earlier year to 100 total, split 46 recurring and 54 one-off, and the later year reads 87 recurring and 30 one-off, a total of about 117. Total collected revenue grew about 17 percent over the two years. The recurring share moved from 46 percent of collected revenue to about 75 percent of collected revenue.

Read the share alone and this is a success story. Read the two components separately and the one-off line fell by about 45 percent while the business grew, which means new-customer acquisition stopped working and the plan base covered the hole. New customers had fallen from about eleven a month to about three a month over the same two years, and nobody noticed because the schedule was full.

That shop's exposure is concentration. A single property-management account holding roughly a quarter of their plan customers does not renew, and 75 percent recurring becomes a hole that nobody in the building has the habits to fill, in a company that has not run a selling week in two years. Run the same mixed-invoice correction on them and the guaranteed figure is about 53 percent of collected revenue, still above the top of the band, so the diagnosis holds. It is simply less alarming than 75 made it look.

The rule that falls out: never read the share without the absolute one-off figure beside it. A share cannot say which of its two parts moved, which is a general property of rates that a sibling card owns; indexing both components to the same base period, in the same collected-revenue units, is what separates them here in one glance.

What moves this number, and what only looks like it does

The last two rows are the ones that produce a panic. A share that fell because a large installation landed is not a plan problem, and the plan count proves it in ten seconds. A share that moved because a fortnight of collections slipped past the window edge is not a problem at all, and the tell is that the job counts for the period did not move with it.

Two ways to reach the same share, and only one of them is good news

Start the low shop at 8 recurring and 92 other, indexed to a total of 100 units of collected revenue.

Route one, grow the plans. To hold 92 units of other work and read 25 percent, recurring has to reach about 30.7 units, because 30.7 divided by 122.7 is 25 percent. That is recurring growing to roughly 3.8 times its current size, and total collections growing about 23 percent.

Route two, do nothing and lose the demand work. Hold recurring at 8 units and let other work fall to 24 units, because 8 divided by 32 is also 25 percent. That is a 74 percent fall in one-off collections and total collections down to roughly a third of where they started.

Both routes land on exactly 25 percent. One is the business you were trying to build and the other is the business closing. This is the whole argument for reading the share alongside its components rather than as a target to hit: as a target, the metric is satisfied identically by growth and by collapse.

References

• See related: Zero-Revenue Jobs and Which Numbers They Touch, for why a plan visit billed at nothing distorts per-job cost averages
• See related: Contract Renewal Rate and the Link That Has To Exist, for the same missing-link defect on agreements rather than on jobs
• See related: The Close Rate Improved Because They Stopped Quoting, which owns the general rule that a ratio cannot be read without the counts underneath it
• See related: The Recurring Revenue a Maintenance Line Can Add, for sizing a maintenance line before you commit to one
• See related: Contract Attach Rate Is Measured Against Every Customer You Ever Had