Recurring Revenue (MRR/ARR)

Recurring revenue is income that repeats predictably over time, typically monthly or annually, from ongoing client relationships rather than one-time projects. The most common forms in agencies are Monthly Recurring Revenue (MRR) from retainer agreements and Annual Recurring Revenue (ARR) from annual contracts or subscriptions. Recurring revenue is highly valued because it provides financial predictability, improves cash flow stability, reduces the feast-or-famine cycle common in project-based work, and makes agencies more valuable businesses (higher multiples in acquisitions). Recurring revenue transforms agency economics. Instead of constantly selling new projects to replace completed ones, you have a base of predictable income that continues month after month. This stability allows for better financial planning, more confident hiring decisions, and investment in growth initiatives. It also creates stronger client relationships because you're working together continuously rather than on isolated projects, leading to deeper understanding and more strategic work. The most common sources of recurring revenue for agencies include retainer agreements (monthly fees for ongoing work), productized service subscriptions (monthly packages like content creation or SEO), software or platform subscriptions (if you offer proprietary tools), and maintenance or support agreements (ongoing website maintenance, hosting, etc.). The key is creating ongoing value that clients want to continue paying for month after month. Building recurring revenue requires a shift in mindset and business model. Instead of thinking in terms of discrete projects, you think in terms of ongoing relationships and continuous value delivery. This might mean packaging services into monthly offerings, creating retainer structures that provide ongoing value, or developing products that clients subscribe to. It also requires different sales approaches—selling ongoing relationships rather than one-time projects. Recurring revenue metrics are important for tracking and managing this revenue stream. MRR (Monthly Recurring Revenue) measures predictable monthly income. ARR (Annual Recurring Revenue) is MRR multiplied by 12, representing annualized recurring revenue. Churn rate measures how much recurring revenue you're losing (clients canceling). Net new MRR measures growth (new MRR minus churned MRR). These metrics help you understand the health and growth of your recurring revenue base. Many agencies struggle to build recurring revenue because they're stuck in project-based thinking, don't know how to package services for ongoing delivery, or haven't identified services that lend themselves to recurring models. But even agencies that primarily do project work can often create recurring revenue streams through maintenance agreements, retainer components, or productized service offerings. Common mistakes include not tracking recurring revenue metrics (not understanding this important revenue stream), underpricing retainers (not capturing the full value of committed capacity), not delivering ongoing value (leading to churn), and not actively selling recurring revenue (treating it as nice-to-have rather than strategic priority). The most successful agencies treat recurring revenue as a strategic goal, actively working to convert project clients to recurring relationships and creating new recurring revenue streams.