Valuations...Recurring ≠ ReOCcurring

These 2 letters "OC" make a big difference in company valuations. I see them confused often by all parties.

Recurring = client pays a predictable amount of money at a predictable time frequency. e.g. You send your customer a bill for a yearly HVAC checkup.

ReOCcurring = client pays you frequently for a service but it is not repeated. e.g. Your customer needs their AC fixed approximately every 4 months because they refuse to invest in a new unit.

The first time I had this scarred in my brain was when I was at a company post-acquisition. I was within earshot of a conference call between the acquiring CEO and the acquired executive team. The CEO found out that her M&A team had overpriced the valuation due to this oversight a product line, and her new executive team never pointed it out. She yelled so loud the conference call speaker shook.

Anyway, in the past week, I've heard a broker and a business owner confuse the two so just a reminder.