Customer contracts

A book of recurring revenue backed by signed contracts is one of the more valuable things a small business can show a buyer, because it is future revenue that does not depend entirely on the relationship continuing informally. The value of that book, though, depends on the fine print — a contract that quietly ends on a change of ownership is worth much less than one that does not.

What determines whether it carries over

• Whether the contract requires the customer’s consent to assign it to a new owner
• Whether a change-of-control clause lets the customer walk away regardless of assignment
• The remaining term and any renewal or cancellation notice periods
• Whether pricing was negotiated as a personal favour to the current owner rather than a standard rate

Why this matters more than the revenue number alone

Two businesses with identical recurring revenue can be worth very different amounts depending on how much of that revenue is actually locked in by contract versus how much is habit. Reading the contracts, not just the revenue schedule they produce, is what separates a durable customer base from one that is one phone call away from leaving.