Ops Terms Flashcards
Account Based Marketing (ABM)
Everything B2B marketers do to support sales at target accounts. This includes selecting and prioritizing account lists, generating new contacts, gathering account intelligence, building account plans, running field-marketing events, prospecting into new relationships, and engaging accounts online. In other words, these are tailored marketing strategies for very specific businesses or organizations that have a known product or service fit
Annual Contract Value (ACV)
annual recurring revenue, both that which is hitting the P&L and is sitting in backlog - does not include one-time fees in ACV. For example, “Company XYZ has $10M of ACV, with $9M in ARR and $1M sitting in backlog as unimplemented ACV”
Annual Recurring Revenue (ARR)
annualized monthly recurring revenue; this is a P&L metric, as it is tied to true revenue hitting the income statement
ARR = MRR * 12
Average Revenue per Unit (ARPU)
average revenue, including ancillaries like payments and partnerships, for each product sold across channels or markets.
Average Sales Price (ASP)
the average price at which a product is sold across channels or markets
Billings
MRR added from new customers that went live (i.e., billed) in a month. (note: this is what would be used in a MRR bridge, and is the most important number, because it represents accounts where we are driving revenue). Billings is a lagging indicator because it is driven by the Bookings performance of prior months
Bookings
new recurring revenue (typically measured monthly but could be measured annually) added from new customer contracts signed in a month. This provides the most current lens into customer acquisition momentum
Business Development Representative (BDR)
role that 1) qualifies leads from marketing campaigns as sales opportunities 2) makes outbound cold calls and emails with the goal of creating a sales opportunity. Role can sit in marketing or sales; ~75% of cases the role is in sales. Also called a Sales Development Representative (SDR)
Contracted Revenue
Contractually guaranteed revenue. This term also refers to the projection of revenue in a future period, modified to consider any guaranteed revenue expansion
Cross-sell
selling a related or complimentary product to an existing customer. For a multiple rooftop/location logo, cross-sell could be defined as selling the services/products that exist at one rooftop/location into a different rooftop/location of the same logo
Customer Acquisition Cost (CAC)
the fully burdened cost required to sign up a new customer, including net one-time onboarding costs. A proper CAC calculation involves consideration of all departmental costs of sales and marketing, plus one-time costs and sales and marketing expense required to acquire a new customer. If implementation and training is negative gross margin, then these costs (net of any offsetting one-time fees) should also be included
Customer Churn
a measure of the % of individual customers or accounts churned in a given year
Customer Retention % = 1 – Customers Lost/ Total Customers (n-1)
Customer Lifetime Value (CLTV)
the economic value, net of costs, delivered over the life of a customer, and is equal to lifetime gross profit (LTV = RGP x eLT). Lifetime value of a customer CLTV = (new ARR * GM + GM $s from SSSG) / (15% discount rate* + gross revenue churn rate)
- For GM, long run is correct from a corporate finance perspective. Ideally, we “model the customer” including a SSSG curve and/or any GM form pricing expected. But, this is often too precise and so we just work off the P&L. In which case, current GM is adequate
- Ideally, we’d use WACC by company, but to simplify I typically use 15%
- For license/maintenance businesses, non-recurring gross profit from license revenue should be included
- Same-store-sales growth, if relevant, should also be factored into the numerator of this calculation. If included, then the account managers driving this cross-sell should be included in CAC. For businesses with a SSSG “curve” then a more bespoke discounted cash flow model will produce a more accurate CLTV figure
Greenfield
portion of an addressable market in which there is no equivalent installation of the technology or services being evaluated
Gross Retention $
A conservative measurement of recurring revenue retention, calculated on an annualized basis the rate at which a given dollar of revenue is retained from year to year, without credit for upsells. This does include deductions for cancellations, reductions and price cuts (most conservative methodology), without adding new sales or upsells, other than price increases for the same revenue cohort.
Gross $ Retention % = 1 – ($ ACV Cancelled + $ ACV Downsell)n /
$ TotalACV(n – 1)
Gross Revenue Churn
a measurement of recurring revenue churn, calculating on an annualized basis the rate at which a given dollar of revenue is lost from year to year due to customer losses. A more conservative methodology would also include deductions for downsells, but typically factors downsells in SSSG rather than churn. Gross Revenue churn is also used in the denominator of the CLTV calculation.
Gross $ Retention % = ($ ACV Cancelled) / $ TotalACV(n-1)
Inbound Lead
inverse of outbound. Company provides information and incentives that leads a prospect inward. The individual prospect then chooses the type and timing of the interaction. These leads ideally go through a lead scoring process at the top of the funnel before it is passed to a Business Development Representative (BDR) for further qualification
KPIs
Key performance indicators; key metrics that a business tracks to assess how it is performing - may vary from business to business
Logos
Businesses
Marketing Qualified Lead (MQL)
An opportunity to be validated by a Business Development Representative (BDR), against pre-determined criterion. If the lead has a passing score, it will be passed to Sales
Monthly Recurring Revenue (MRR)
MRR is a measure of recurring revenue components of a subscription business. It will exclude one-time and variable fees. This is monthly revenue that hits the P&L (tied to billings)
Multiple of Investment (MOI)
multiple that gives insight into the investment’s performance by showing the total value as a multiple
MOI = (PE Total Distributions + Any Residual Value) / Equity
Net Retention $
A measure of the overall change in the base of recurring revenue from one year to the next, including upsell, downsell (both inclusive of price changes), and cancellations
Net $ Retention % = 1 + ($ ACVUpsell - $ ACVCancelled - $ ACVDownsell
Note: that for some businesses (especially high velocity businesses with shorter lifetimes, or where customers on pilots are factored into an ACV waterfall), using an average of the beginning and ending customer counts in the denominator may be more appropriate
Net Revenue Churn
measure of the overall loss in the base of recurring revenue from one year to the next, including upsell, downsell (both inclusive of price changes), and cancellations
Net $ Retention % = ($ACV Upsell - $ACV Cancelled - $ACV Downsell)/
$Total ACV (n-1)
Note: For some businesses (especially high velocity businesses with shorter lifetimes, or where customers on pilots are factored into an ACV waterfall), using an average of the beginning and ending customer counts in the denominator may be more appropriate
Outbound Lead
inverse of inbound. This is an effort, determined by the company and not the prospect, against a list of (ideally prioritized, but not yet qualified) target prospects
Recurring Gross Profit (RGP)
the gross profit generated each month by a customer
RGP = MRR – recurring COGS
Re-occurring Revenue vs. Recurring Revenue
Re-occurring is revenue that happens again but does not have a high likelihood to continue in the future. Recurring is the portion of a company’s revenue that is highly likely to continue in the future. In other words, recurring revenue is revenue that is predictable, stable and can be counted on in the future with a high degree of certainty.
Rooftops
Physical locations
Sales Accepted Lead (SAL)
This is an MQL that is accepted by Sales (stage 0, pre-pipeline). This can be thought of as the “glue” that bounds BDRs to sales
Sales Cycle
process companies undergo when selling a product to a customer. Companies tend to have different steps and activities in their sales cycle, depending on what it takes from a customer touchpoint perspective, to move a prospect through to a close sale
Sales Qualified Lead (SQL)
An accepted, BDR-validated opportunity (typically stage 0, pipeline). BDR qualified the potential opportunity and passes to sales or a meeting is set up for further discovery by a sales rep
Sales Qualified Opportunity (SQO)
Sales conducts a needs analysis, determines there is a product fit, moves the opportunity forward (typically) to a demo (stage 1 pipeline)
Sales Quota Capacity
the total sales quota that can be achieved by a rep or team
Same Store Sales Growth (SSSG)
amount of revenue growth by a logo in a year. Includes cross-sell, upsell, and downsells (i.e., all drivers of revenue changes within the current customer base except for customer losses, which would be factored in churn)
Total Contract Value (TCV)
the value of both one time and recurring revenue of a customer contract
Transactional Revenue
revenue in which a customer pays just once for the value (e.g., product, good, service) received
Unweighted Pipeline
total dollars in the pipeline
Upsell
getting the customer to purchase more expensive items, upgrades or other add-ons resulting in a more profitable sale
Weighted Pipeline
total dollar dollars in the pipeline multiplied by the probability of close given the pipeline stage
