Reoccurring Revenue vs. Recurring Revenue

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Mike Malatesta built Advanced Waste Services, a company that helped businesses dispose of their industrial waste, to $45 million in annual sales before a fateful lunch changed his life forever. It was with a division president of Covanta (NYSE: CVA) who saw acquiring Malatesta’s company as the perfect way to enter the industrial waste industry.

After creating a mini bidding war for his business, Malatesta agreed to be acquired for $51.5 million or around eight times EBITDA. For Malatesta, who started his business picking up industrial waste in a truck, it was an incredible outcome. In this episode, you’ll discover:

• How you need to change your management style once you hit $10 million in sales.
• How “key man” insurance works.
• What a platform acquisition does.
• How to nudge up an acquisition offer without overplaying your hand.
• The difference between “reoccurring” revenue and “recurring” revenue and which one acquirers like more.
• A negotiation mistake that ended up costing Malatesta $4 million.
• How an escrow works and why it’s different than an earn-out.

Malatesta credits his recurring revenue model as the reason he could fetch more than eight times earnings for his company. We’ll figure out your recurring revenue model in step five of The Value Builder System™ — get started for free by completing the Value Builder questionnaire. 

Check out the written by Ryan Abbott on Why Recurring Revenue Matters To Acquirers.

Curious about what your company might be worth? Start with a Built to Sell Valuation.

Check out our full M&A Glossary

About Our Guest

Mike Malatesta is a successful entrepreneur and Business Executive. Malatesta, founded, built, and sold one of the largest environmental services companies in the Upper Midwest. Currently he heads-up ERC Midwest LLC, a holding company he formed with Rock Island Capital to purchase and grow companies specializing in recycling and disposal solutions for commercial and manufacturing clients. ERC Midwest successfully capitalized two environmental companies in 2018, one in 2019, and is actively pursuing others. In 2018, Mike founded a podcast called “How’d It Happen?” that explores the stories of successful people from all walks of life. He recently recorded his 135th episode.
Twitter: @MalatestaMike,
LinkedIn: linkedin.com/in/mikemalatesta,
Website: mikemalatesta.com,
Podcast: https://mikemalatesta.com/category/podcast/