KPI Terms Flashcards
Bookings
is the value of a contract between the company and the customer. It reflects a contractual obligation on the part of the customer to pay the company.
Revenue
is recognized when the service is actually provided or ratably over the life of the subscription agreement. How and when revenue is recognized is governed by GAAP.
ARR
(annual recurring revenue)
Is a measure of revenue components that are recurring in nature. It should exclude one-time (non-recurring) fees and professional service fees.
ARR Per Customer
Is this flat or growing? If you are upselling or cross-selling your customers, then it should be growing, which is a positive indicator for a healthy business.
MRR
(monthly recurring revenue)
Often, people will multiply one month’s all-in bookings by 12 to get to ARR. Common mistakes with this method include:
(1) counting non-recurring fees such as hardware, setup, installation, professional services/ consulting agreements;
(2) counting bookings (see #1).
Gross Profit
All costs associated with the manufacturing, delivery, and support of a product/service should be included.
TCV
(total contract value)
Is the total value of the contract, and can be shorter or longer in duration. Make sure TCV also includes the value from one-time charges, professional service fees, and recurring charges.
ACV
(annual contract value)
Measures the value of the contract over a 12-month period. Questions to ask about ACV:
What is the size? Are you getting a few hundred dollars per month from your customers, or are you able to close large deals? Of course, this depends on the market you are targeting (SMB vs. mid-market vs. enterprise).
Is it growing (and especially not shrinking)? If it’s growing, it means customers are paying you more on average for your product over time. That implies either your product is fundamentally doing more (adding features and capabilities) to warrant that increase, or is delivering so much value customers (improved functionality over alternatives) that they are willing to pay more for it.
LTV (Definition)
(Life Time Value)
Lifetime value is the present value of the future net profit from the customer over the duration of the relationship. It helps determine the long-term value of the customer and how much net value you generate per customer after accounting for customer acquisition costs (CAC).
Revenue Per Customer (Per Month) =
Average order value multiplied by the number of orders.
Contribution Margin Per Customer (Per Month) =
Revenue from customer minus variable costs associated with a customer. Variable costs include selling, administrative and any operational costs associated with serving the customer.
Avg. Life Span Of Customer (In Months) =
1 / by your monthly churn.
LTV (Calculation) =
Contribution margin from customer multiplied by the average lifespan of customer.
CAC
Customer Acquisition Cost
Gross Merchandise Value (GMV) vs. Revenue
In marketplace businesses, these are frequently used interchangeably. But GMV does not equal revenue!
GMV (gross merchandise volume)
Is the total sales dollar volume of merchandise transacting through the marketplace in a specific period.
Revenue (In Regards to GMV)
Is the portion of GMV that the marketplace “takes”. Revenue consists of the various fees that the marketplace gets for providing its services; most typically these are transaction fees based on GMV successfully transacted on the marketplace, but can also include ad revenue, sponsorships, etc. These fees are usually a fraction of GMV.
Billings
Which is calculated by taking the revenue in one quarter and adding the change in deferred revenue from the prior quarter to the current quarter.
Blended ACA =
Total acquisition cost / total new customers acquired across all channels
Paid ACA =
Total acquisition cost / new customers acquired through paid marketing
Why is Paid ACA Important?
Because it illustrates how well you paid advertising is working. Blended ACA is not a good indicator of how well paid marketing efforts work due to the types of ACA that are associated. Sometime clients will come to you and require no paid marketing efforts.
Active Users
Different companies have almost unlimited definitions for what “active” means. Some charts don’t even define what that activity is, while others include inadvertent activity — such as having a high proportion of first-time users or accidental one-time users.
Be clear on how you define “active.”
MoM
(Month-on-Month Growth)
Often this measured as the simple average of monthly growth rates. But investors often prefer to measure it as CMGR (Compounded Monthly Growth Rate) since CMGR measures the periodic growth, especially for a marketplace.
CMGR (Definition)
(Compounded Monthly Growth Rate)
Measures the periodic growth of both a company and a marketing place or industry.
CMGR (Calculation) =
(Latest Month / First Month) ^ (1 / # of Months) -1
Churn
Is the measure of how many customers stop using a product or service.
Monthly Unit Churn =
Lost customers / prior month total
Gross Churn
MRR lost in a given month / MRR at the beginning of the month
MRR
(Monthly Recurring Revenue)
Net Churn
(MRR lost minus MRR from upsells) in a given month/MRR at the beginning of the month.
Burn Rate
Burn rate is the rate at which cash is decreasing.
Monthly Cash Burn =
cash balance at the beginning of the year (Minus -) cash balance end of the year / 12
Net Burn =
[Revenues (including all incoming cash you have a high probability of receiving) – gross burn] is the true measure of amount of cash your company is burning every month.
Gross Burn =
monthly expenses + any other cash outlays
Cumulative Charts
By definition always go up and to the right for any business that is showing any kind of activity.
FBLA
Facebook Lead Ad
eRTB
Enhanced Real Time Bidding
LC
Lead Conduit
TF
Trusted Form
CBM
Consent Based Marketing
CQ
Current Quarter
