Recurring Doesn't Mean What You Think It Means

I've been thinking lately about the word "recurring."

Not the definition — I know the definitions — but the way the word lands in a room. When a founder says "we have two million in recurring revenue," something happens to the people listening that goes beyond the number. The word "recurring" carries a promise that isn't in its definition. It implies permanence. A floor. Revenue that has decided, on its own, to keep showing up. And the thing is, the word doesn't actually mean that. "Recurring" just means it happened more than once. It is a statement about the past dressed up as a prediction about the future, and the people hearing it — the investors, the board members, the founder herself — fill in the rest. They hear "recurring" and think "guaranteed," because that's what they want it to mean.

This is not a SaaS phenomenon. It's a human one. We hear a word and we fill it with the meaning we need. A doctor says "benign" and the patient hears "nothing to worry about ever again." An economist says "soft landing" and the market hears "we've already landed." The gap between what a word technically means and what it emotionally promises is one of those things that shows up everywhere, but it shows up with particular force in finance, where the emotional stakes of the words are measured in millions.

In SaaS, "recurring" has a specific, narrow meaning that is much smaller than its emotional footprint. A subscription contract where the software is delivered continuously, recognized linearly over the term, renewable at the customer's option. That's it. That's what qualifies. But the founder who spent two years building a client relationship, who watches the same corporate buyer come back every quarter with a new purchase order for consulting, who sees the same cash show up in the same month — that person hears "recurring" and thinks: this qualifies. It recurs. The money is real. The relationship is stable. And by any normal use of the English word, they'd be right.

"Recurring" in SaaS means something more specific than "keeps happening," and the industry decided this at some point without telling the people building the companies.

Here is where it starts to matter. A company shows €2M ARR on the dashboard. The P&L — which typically sits with the cabinet comptable and arrives quarterly as a PDF nobody reads — says €1.4M in recognized revenue. That's a 30% gap. And the founder, when someone finally puts both numbers on the same page, can't explain it.

This is not fraud. Both numbers are correct. They're answering different questions under different rules, and neither was designed to agree with the other.

The most common source of the gap is timing. A contract signed in November for a January start appears in the dashboard the day it's signed. The P&L won't recognize a cent until January. For a company with mixed billing cycles and staggered go-live dates, this alone can account for 10-15% of the headline number.

But what I find more interesting than timing is what gets included.

There's a pattern I've noticed repeatedly where the gap comes from managed services — consulting hours, integration work, quarterly project engagements — blended into one number labeled "MRR" alongside subscriptions. I want to be precise about what's happening here, because the instinct to call this "aggressive" is wrong. Take a company where the same clients have been coming back every quarter for two years. Same clients, similar scope, quarterly purchase orders. The cash shows up predictably. From a commercial standpoint, calling that recurring is completely intuitive — it recurs. The founder who built those relationships, who can name every client in that ARR, who watched them renew quarter after quarter — that person is not being reckless. They're using the word the way the word feels when you're inside the company.

And this is where the human tendency I started with becomes expensive. The founder heard "recurring" and filled it with the meaning she needed: permanence, a floor, something you can plan around. The investor will hear "recurring" and fill it with the meaning he needs: scalable, software-margin, high-multiple. These are different concepts that happen to use the same word, and the gap between them is where the 30% lives.

Managed services don't qualify under the accounting definition, even when the client relationship is deeply stable. The people doing the work are the asset, not the software. From an investor's perspective, this matters enormously — people-dependent revenue doesn't scale the same way, doesn't carry the same margin, doesn't justify the same multiple. But from the founder's chair, the distinction feels arbitrary. The money is real. The relationship is stable. The word fits.

This is the kind of thing I think about a lot — the way a distinction can be simultaneously correct and unfair.

The gap typically surfaces in one of three moments: a fundraise, an acquisition, or a cash calculation. The fundraise and acquisition are stressful but at least expected — you know someone is going to scrutinize the numbers, you can prepare. The cash calculation is the one that catches people off guard.

The dashboard says €2M ARR. Burn rate is €100K per month. The founder calculates roughly 18 months of runway. But the P&L says €1.4M — the revenue that maps to actual cash flow, what's been earned and can be collected. With €1.4M in revenue and the same burn, runway is closer to 11 months. That's the difference between having options and having urgency. The hiring plan gets questioned. The product roadmap gets compressed. The next fundraise suddenly needs to happen now, from a position of less leverage.

In France, a company at €2M ARR typically has an external accountant — a cabinet comptable — who handles the bilan and the liasse fiscale but has never heard of MRR or NRR. And they have a founder watching the dashboard who has never read IFRS 15. Nobody is responsible for the bridge between the two systems. Not because anyone is negligent, but because the company isn't big enough to justify a CFO.

So the gap sits there. It accumulates quietly over quarters because the two systems live in different tools, different rhythms, different people. The dashboard updates daily. The statutory accounts are produced quarterly, sometimes only at year-end. Nobody has an incentive to compare them. The founder is focused on growth. The accountant is focused on compliance. Each is doing their job correctly. The gap doesn't come from failure. It comes from the absence of a function that hasn't been created yet.

What makes this genuinely hard — and where I'm honestly uncertain — is whether building a reconciliation bridge early is worth the effort for a company at €1-2M ARR that hasn't raised and isn't planning to sell. The reconciliation gets built when it's needed — which means during a fundraise, under pressure, when the gap has had years to accumulate and nobody remembers why specific items were classified the way they were.

The thing that stays with me about this is how it all traces back to that word. A founder heard "recurring" and understood it the way a normal person would — as a description of something that keeps happening. The industry had decided it meant something narrower, and the accounting profession had decided it meant something narrower still, and nobody told the founder until the moment the gap became a problem. Every individual decision in the chain was reasonable. It's reasonable to include managed services clients who come back every quarter. It's reasonable to count signed contracts with confirmed start dates. It's reasonable to not hire a CFO at €2M ARR. It's reasonable for the cabinet comptable to focus on tax compliance. The gap emerges from the accumulation of reasonable decisions that nobody is positioned to reconcile.

The question arrives with urgency. The answer requires time that urgency doesn't allow.

I'm not sure what to do with that observation, except to notice that it starts with a word — a perfectly ordinary word — that different people filled with different meanings, and nobody checked.