SaaSpedia
the encyclopedia of
subscription & SaaS finance terms and metrics
ARR
Annual Recurring Revenue
There can be significant confusion over the term ARR, its use and the measurement of ARR because it feels and sounds like a measure of “revenue” in the context of revenue recognition. However, ARR is not necessarily a measure of recognized revenue.
MRR
Monthly Recurring Revenue
MRR is an acronym for Monthly Recurring Revenue or, very simply, a measure of your predictable revenue stream. The primary purpose of MRR is to permit performance reporting across dissimilar subscriptions terms.
CLV
Customer Lifetime Value
Customer lifetime value, also referred to as LTV and CLV, is the estimate of the projection of gross margin contribution per customer over the life of the average customer.
CAC
Customer Acquisiton Cost
Customer Acquisition Cost, or CAC, is the cost of acquiring a new customer in your business. This metric is used in a variety of industries but is perhaps most common in SaaS and other subscription businesses.
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CHURN
Measuring Losses
While there are many variations of churn, churn is always a measure of attrition or loss, and it can be lost customers, contracts, MRR, GAAP revenue, contract value or bookings.
RENEWAL RATE
Measuring Retention
Renewal rate is a measure of retention. Renewal rate is expressed as a percentage and can mean different things to different people.
REVENUE
Recognizing Revenue
Revenue Recognition is an accounting principle and a process for reporting revenues by recognizing the monetary value of a transaction or contract over a period of time as the revenue is “earned.”
FINANCIAL TERMS
Financial Terms
You manage cash flow, but "finance" is left to the accountant that prepares your taxes. If this is you, read on and be sure to watch the essential finance concepts video.
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