ARR stands for Annual Recurring Revenue, which actually represents the total value of the contracted recurring revenue components of your subscriptions over a one-year period. This is B2B subscription business specific term, being less used than MRR. The reason for this is that ARR is usually used as metric by B2B subscription businesses that offer multi-year agreements.
ACV, short for Annual Contract Value, is used as a metric to calculate the average yearly value per customer contract. It does not refer to one time fees. It doesn’t bring a lot of value when standing on its own. It can, however, prove to be very useful when compared with Customer Acquisition cost, as it shows when can the customer acquiring cost can be recovered.
ACL short for Average Contract Length represents the average duration of all customer contracts. To calculate the Average Contract Length, all committed contracts are added up in months( monthly plans are considered to each represent 1 month) and then, divided by the total number of contracts.
ARPU, short for Average Revenue per User, represents the revenue generated by each active customer. ARPU is easily calculated by dividing your MRR to the total number of active users within that month.
Application Integration refers to the actual process of implementing a new solution and integrating other existing solution with the new one. It has often been described as messy and complicated, which is why clients usually receive support throughout the application integration process.
Billing is the actual amount, previously invoiced, that is due for payment shortly. This is an important metric in the SaaS world, as it displays the amount of money you are making in a specific period and it shows how your business is doing.
The Burn rate allows you to understand how quickly cash holdings are decreasing. There is Gross Burn Rate and Net Burn Rate. Gross Burn Rate shows the amount of cash that has been spent each month, where the Net Burn Rate displays the difference between cash out and cash in. To have a profitable business, you need a negative burn rate.
The Break-even point is when expenses are equal with revenue. No loss or gain has been made, opportunity costs have been paid and capital returned. From this moment on, the business can start producing a profit.
By means of CAC, short for Customer Acquisition Cost, you will be able to determine if what you are paying to gather customers is above or under what you are gaining. If acquiring a customer costs you $10 and your monthly subscription plan is $5, then your business is not looking good.
CAC Payback Period represents the amount of time necessary to recover the investments made for acquiring customers. It shows you your breakeven point. CAC Cashback Period is calculated by dividing the customer acquisition cost to average revenue per account by gross margin percent.
The term churn actually refers to the number of customers/subscribers who stop using your service over a given period of time. Annual Churn is the percentage rate at which you are actually losing subscribers.
Churn MRR represents the amount of monthly recurring revenue which has been lost as a result of customer cancellations. Because it is simpler to handle, Churn MRR usually comes in the form of a percentage. To obtain that percentage, Churn MRR ( the sum of the MRR of all lost subscribers) is divided by the MRR for a given period.
COGS, short for Cost of goods sold, represents the costs of production of the products/services sold by the company in question. In the case of SaaS, COGS can be used to measure the costs of labor. COGS excludes other expenses such as those related to distribution or sales force.
CPC, short for Cost per Click, is the cost of every click received from each individual as a result of a paid marketing campaign. It is generally used to measure the success of paid marketing campaigns.
Customer success refers to the department part of your business that is focused on fulfilling all customer requests, offering support in all areas related to your product/service. The goal is to achieve a highly satisfying customer experience.
Cloud computing is the actual delivery of computing services, which refer to servers, databases, networking, software, intelligence, analytics and so on, through the use of the Internet, also known as the cloud. Cloud computing is generally regarded as a fast and flexible service, encouraging innovation.
The Consumption-based pricing model rests on the idea that customers pay according to the amounts of services they have actually used. This type of pricing model is used in the IT industry, specifically in the distribution of cloud computing services.
Customer Lifecycle actually refers to the steps a customer makes in the processes of buying a product. In the customer lifecycle, the customer goes through 4 phases: considering the product, purchasing it, using it and ultimately, maintaining loyalty.
A Call to Action is a term generally used in marketing and it refers to a group of words or phrases that can be used in sales scripts, promotional messages or web pages to encourage customers to make a purchase or to act immediately.
DAU, short for Daily Active Users is a way of calculating the success of an internet product. This metric is used to measure how many visitors have visited/interacted with the product in question on a specific day.
Inbound marketing is a technique by means of which you capture the attention of your audience, this generating leads/customers. Tactics such as social media marketing, SEO or content marketing are used in this process.
LVR, short for Lead Velocity Rate is used to measure the level of growth in qualified leads for one month as opposed to a previous one. By means of this metric, the business trajectory of a company can be predicted.
The Loyalty loop is a concept used in customer service and illustrates the customer’s buying process, more specifically the nature of the product bought, and his intentions of making future purchases from the same company.
Marketing automation represents the process through which a team sets up a robot to handle different small, time-consuming tasks. Marketing automation allows you to better understand the customer’s journey as well as improve overall lead conversion.
MVP, short for Minimum Viable Product, is the version of a new product by means of which a team can collect feedback and information, understanding what needs to be changed in order to obtain the best possible results.
Multi-tenancy is an architecture in which one software application runs on a server and serves multiple customers, also known as tenants. It can be very useful, economically speaking because it allows maintenance and development costs to be shared.
The Net Revenue Retention Rate is a metric by means of which companies measure the total change in recurring revenue, looking at the same group of customers over a determined period of time. The current MRR from a group of people is divided by the company’s MRR recorded in the previous year, from the same group of people.
Net MRR Churn Rate is a metric through which companies can measure revenue lost from one month to the next, due to either cancellations or downgrades, after considering revenue from existing customers by means of upgrades or expansion.
The Omnichannel approach represents a strategy in which a company decides to market its services across multiple channels to ensure better information spread. All channels used in this strategy need to collaborate and align perfectly in their efforts of marketing the services.