Why 66% of buyers prioritize recurring revenue, and why that is not enough.
Recurring revenue has become the single most cited acquirer criterion in 2025–26. It has also become the single most overused phrase in lower-middle-market deal marketing, attached to every subscription, retainer, and multi-year contract regardless of what the underlying customer-acquisition data actually shows.
Recurring revenue without documented customer acquisition infrastructure is not a growth asset. It is a maintenance obligation.
Revenue that recurs because existing customers stay is a retention story. It tells you the company is good at keeping what it has. Revenue that grows because the company acquires new customers through documented, repeatable systems is a different thing entirely. It tells you there is infrastructure that will keep producing new customers after the founder walks out the door.
The recurring revenue base sets the floor. Acquisition infrastructure sets the ceiling.
What separates the premium tier from the discounted tier in the lower-middle market is not whether a company has recurring revenue. Most serious listings do. What separates them is the combination: recurring revenue plus documented acquisition infrastructure that a post-close team can operate without the seller. That combination is what buyers are actually paying for.
- 66% of buyers cite recurring revenue as top criterion
- 40%+ deal-value growth, flat volume
- 10+ portfolio firms now score GTM infrastructure
The four questions advisors should ask about every listing.
- Digital visibility vs. competitors: not just “we have a website,” but where they rank, what they are known for, and the gap to the nearest competitor.
- Customer acquisition cost by channel: what it actually costs to bring in a customer through referral, outbound, digital, or partnership, and whether that cost is trending up, down, or flat.
- Sales-process independence: whether the process runs without one person showing up every day to run it.
- Inheritable brand equity: whether a buyer's operating team can inherit and build on the brand.
If the answers are yes and supported by independent analysis, the recurring-revenue story has a foundation. The buyer can underwrite a growth thesis rather than assume one.
The cost of only telling half the story.
A PE firm evaluating two comparable companies, both with solid recurring revenue and reasonable EBITDA, will treat them differently based on what they can document about acquisition infrastructure. One becomes a platform acquisition with an active growth roadmap. The other becomes a hold-and-maintain asset with a lower entry multiple and heavier earn-out language. The distinction is not because the businesses are different. It is because the documentation is.