Sass Glossary

The total dollar value of all new contracts signed. Usually taken as an
Bookings
annualized number even if the contract period is longer than one year.

Revenue is amount of money that can be recognized according to

accounting policy. Even if it is paid for upfront, usually subscription
Revenues revenue can only be recognized ratably over time as the service is
delivered. If more money has been paid than can be recognized, the
difference goes into a balance sheet item called Deferred Revenue.

The Monthly Recurring Revenue at the end of each month. Computed by

MRR
taking the MRR from the previous month and adding Net New MRR.

Annualized Run Rate = MRR x 12. ARR is annual run-rate of recurring

ARR revenue from the current installed base. This is annual recurring revenue MRR * 12
for the coming twelve months if you don't add or churn anything.

ACV - Annual Contract Value Annual Contract Value of a subscription agreement. ARPA *12

New MRR/ARR The increase in MRR from new customers in the current month.

The increase in MRR from expansion in your installed base in the current
Expansion MRR/ARR
month.

The total reduction in MRR due to downgrades compared to the previous

Contraction MRR
month. Otherwise known at MRR Churn.

This is the sum of the three different components that will change MRR ($) MRR = ($) New MRR + ($) Expansion MRR – ($) Churned
Net New MRR/ARR
during each month. MRR

A measure of a company’s ability to grow recurring revenue in spite of

(($) New MRR + ($) Expansion MRR) / (($) Churned MRR + ($)
MRR Quick Ratio churn. Sometimes referred to as growth efficiency. An estimate of the
Contraction MRR)
average cost to acquire a new customer.

Estimating or averaging out the number of years a customer continues

Average customer lifetime 1 / (%) Monthly Churn
purchasing from your company.

ARPA – Average monthly recurring Revenue per This number tells you the average monthly revenue per customer. It is
($) MRR / (#) Customers
Account useful to look also for just new customers booked in the month.

The average expense incurred to gain a single customer. There are several
CAC = ((Marketing expense in month -7)+(Marketing
ways to calculate CAC. The formula we use is more suitable for B2B
expense in month -6) / 2) + (Sales Expense in month -5)+
CAC companies and takes into account the Marketing and Sales Cycle of the
(Sales Expense in month -4)+(Sales Expense in month -3)….
company. The formula represents a company whose typical customer
/5) / number of new customers
spent 2 month in marketing and then 5 months in sales.

The number of months it takes to earn back the money invested in CAC / ($) Revenues from new customers * (%) Gross
CAC Payback Period
acquiring customers. Margins

The average revenue a single customer is predicted to generate over the

($) ARPA * (%) Gross Margin / (%) Customers or MRR
Lifetime Value (LTV) duration of their account. In order how to understand LTV you need
Monthly Churn
enough data over substantial years.

Used to approximate return on investment (ROI) for customer acquisition.

LTV:CAC Ratio ($) LTV / ($) CAC
Mostly used for B2C companies

B2B companies usually use this metric to determines efficiency in

generating incremental recurring revenue. Gives you an idea of how many Adjusted Sales and Marketing Expense (Found in CAC
Sales Efficiency (SaaS Magic Number)
years it will take you return the CAC. It is recommended to use the same Calculation) / (Net new MRR * GM)
period as in your CAC.

the number of customers cancelling (ΔC) per time interval (Δt) divided by monthly/yearly Customers Churn = (#) customers churned
Customers Churn
the number of customers at the beginning of the interval (C). during the period/ (#) customers beginning of period

This is the formula to calculate yearly churn from the data on monthly
Annual Customer Churn Rate Annual Churn Rate = 1 – (1 – (%) Monthly Churn Rate)^12
Churn

lost revenue due to churned customers as a percentage of total recurring

($) Churned ARR(MRR) at the period / ($) previous period
Gross ARR(MRR) churn revenue. Help you understand a scenario in which you were only losing a
ARR(MRR)
few customers, but they were your biggest $ value customers.

Net Monthly Recurring Revenue (MRR) Growth Rate measures the month [ ($) Net MRR Month B - ($) Net MRR Month A ] / ($) Net
Net MRR Growth Rate
over month percentage increase in net MRR MRR Month A

The rate at which MRR is lost through downgrades and cancellations, (($) churn MRR + ($) contraction MRR - ($) expansion MRR -
Net MRR Churn Rate [1]
offset by account expansions. ($) reactivation MRR )/ ($) MRR at start of period

(($)Expansion MRR at end of month - ($) Expansion MRR at

The rate of new recurring revenue added from existing customers, usually
MRR Expansion Rate beginning of month) / ($) Expansion MRR at beginning of
through add-ons and upgrades.
month

the dollar value of the renewed and expansion contracts. Usually being DRR = ($) Starting MRR + ($) Expansion MRR - ($) Churn
Net Dollar Renewal Rate
calculated on annually. MRR / ($) Starting MRR

1 – (#) customers churned in period / (#) customers at the

Customer Retention Rate (CRR) “Logo Retention” The percentage of customers retained over a given period of time.
start of the period

The percentage of customers that are lost (i.e. cancel their subscription) (#) Customers churned in period / (#) Customers at the
Customer Churn Rate (CCR) “Logo Churn”
over a given period time. start of the period

Net Revenue Retention considers the starting revenue minus any revenue
(($)Starting MRR + ($) Expansion MRR - ($) churn MRR) / ($)
Net Dollar Revenue Retention (DRR) lost through downsell or churn but offsetting revenue from expansion
Starting MRR
(upsell and/or cross-sell)

Gross Revenue Retention only considers the starting revenue minus any
Gross Revenue Retention Rate (($)Starting MRR - ($) churn MRR) / ($) Starting MRR
revenue lost through downsell or churn.
[1] If the time interval is bigger that your average contract period, you may want to consider to divide it by
the total number of customers at the end of the period
-Rona segev