KPI Terms

Question 1

Bookings

Answer 1

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.

Question 2

Revenue

Answer 2

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.

Question 3

ARR

Answer 3

(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.

Question 4

ARR Per Customer

Answer 4

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.

Question 5

MRR

Answer 5

(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).

Question 6

Gross Profit

Answer 6

All costs associated with the manufacturing, delivery, and support of a product/service should be included.

Question 7

TCV

Answer 7

(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.

Question 8

ACV

Answer 8

(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.

Question 9

LTV (Definition)

Answer 9

(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).

Question 10

Revenue Per Customer (Per Month) =

Answer 10

Average order value multiplied by the number of orders.

Question 11

Contribution Margin Per Customer (Per Month) =

Answer 11

Revenue from customer minus variable costs associated with a customer. Variable costs include selling, administrative and any operational costs associated with serving the customer.

Question 12

Avg. Life Span Of Customer (In Months) =

Answer 12

1 / by your monthly churn.

Question 13

LTV (Calculation) =

Answer 13

Contribution margin from customer multiplied by the average lifespan of customer.

Question 14

CAC

Answer 14

Customer Acquisition Cost

Question 15

Gross Merchandise Value (GMV) vs. Revenue

Answer 15

In marketplace businesses, these are frequently used interchangeably. But GMV does not equal revenue!

Question 16

GMV (gross merchandise volume)

Answer 16

Is the total sales dollar volume of merchandise transacting through the marketplace in a specific period.

Question 17

Revenue (In Regards to GMV)

Answer 17

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.

Question 18

Billings

Answer 18

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.

Question 19

Blended ACA =

Answer 19

Total acquisition cost / total new customers acquired across all channels

Question 20

Paid ACA =

Answer 20

Total acquisition cost / new customers acquired through paid marketing

Question 21

Why is Paid ACA Important?

Answer 21

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.

Question 22

Active Users

Answer 22

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.”

Question 23

MoM

Answer 23

(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.

Question 24

CMGR (Definition)

Answer 24

(Compounded Monthly Growth Rate)

Measures the periodic growth of both a company and a marketing place or industry.

Question 25

CMGR (Calculation) =

Answer 25

(Latest Month / First Month) ^ (1 / # of Months) -1

Question 26

Churn

Answer 26

Is the measure of how many customers stop using a product or service.

Question 27

Monthly Unit Churn =

Answer 27

Lost customers / prior month total

Question 28

Gross Churn

Answer 28

MRR lost in a given month / MRR at the beginning of the month

Question 29

MRR

Answer 29

(Monthly Recurring Revenue)

Question 30

Net Churn

Answer 30

(MRR lost minus MRR from upsells) in a given month/MRR at the beginning of the month.

Question 31

Burn Rate

Answer 31

Burn rate is the rate at which cash is decreasing.

Question 32

Monthly Cash Burn =

Answer 32

cash balance at the beginning of the year (Minus -) cash balance end of the year / 12

Question 33

Net Burn =

Answer 33

[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.

Question 34

Gross Burn =

Answer 34

monthly expenses + any other cash outlays

Question 35

Cumulative Charts

Answer 35

By definition always go up and to the right for any business that is showing any kind of activity.

Question 36

FBLA

Answer 36

Facebook Lead Ad

Question 37

eRTB

Answer 37

Enhanced Real Time Bidding

Question 38

LC

Answer 38

Lead Conduit

Question 39

TF

Answer 39

Trusted Form

Question 40

CBM

Answer 40

Consent Based Marketing

Question 41

CQ

Answer 41

Current Quarter