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)
