Normalized Subscription Revenue

Normalized Subscription Revenue Description: Subscription revenue that is split to the months when the service is delivered. The splitting is called ‘normalization’. Use: Used to calculate Monthly Recurring Revenue (MRR). Why is it needed: You may have received subscription revenue in advance. Normalization prevents these problems: You may think that your SaaS has started to

  1. Author : mark@firstofficer.io
  2. December 11, 2019
Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue (MRR) Description: Monthly Recurring Revenue shows how much revenue you collected from subscriptions. There are several variations of MRR, like Committed MRR (CMRR). It is non-GAAP metric, so analytics apps may calculate it differently. Use: Assess SaaS business month-to-month performance. Calculate all other SaaS metrics. Calculate recurring profit. Create projections to estimate future

  1. Author : mark@firstofficer.io
  2. December 11, 2019
Growth Ceiling

Growth Ceiling Description: The maximum MRR that the current customer flows can support. It’s the point where the MRR from incoming customers matches the MRR lost with the churned customers. Most importantly, at Growth Ceiling your current marketing spend is required just to keep your SaaS from shrinking. Use: Growth Ceiling will help you estimate if

  1. Author : mark@firstofficer.io
  2. December 11, 2019
Committed Monthly Recurring Revenue (CMRR)

Committed Monthly Recurring Revenue (CMRR) Description: Committed Monthly Recurring Revenue is an estimate of how much recurring revenue will be collected next month. It takes into account the current customer commitments and contracts. The biggest difference to Monthly Recurring Revenue (MRR) is that CMRR reduces the recurring revenue from customers who have cancelled their subscription, but the

  1. Author : mark@firstofficer.io
  2. December 11, 2019
Customer Churn Rate

Customer Churn Rate Description: The percentage of customers leaving the business. Use: Estimate how long an average customer stays. Needed to calculate Customer Life-Time Value. Some examples of monthly customer churn rates and respective customer life-times:   Target: Minimize churn – smaller the percentage the better. Recommended monthly churn rate is <1%. Recommended annual churn

  1. Author : mark@firstofficer.io
  2. December 11, 2019
Average Revenue Per Account (ARPA)

Average Revenue Per User (ARPA) Description: The average monthly recurring revenue from a paying customer. Use: Compare month-to-month performance per customer. Estimate how many customers you need to reach and acquire to achieve a certain MRR. Get a crude overview of which plans/prices customers prefer.  Target: Keep an upwards trend. No optimal value. The lower

  1. Author : mark@firstofficer.io
  2. December 11, 2019
End-of-Term Subscriptions aka Churn Baseline

End-of-Term Subscriptions shows who were able to leave – the people whose subscriptions needed to be charged during the month. It also shows how much recurring revenue could have been lost if they all had left. Why is this important? The customers who can churn create a baseline for all churn calculations – except for

  1. Author : mark@firstofficer.io
  2. December 11, 2019
Average Revenue Per User

Average Revenue Per User When you look at your metrics the first time, you are probably wondering: “Is this a good value? Am I kicking ass or throwing away money?” This article explains a couple of ways to use Average Revenue Per User (ARPU). It answers some common questions and shows how optimal trend looks

  1. Author : mark@firstofficer.io
  2. December 11, 2019
THE CHURN GUIDE – DEFINING ACTIVE AND LOST CUSTOMERS

THE CHURN GUIDE – DEFINING ACTIVE AND LOST CUSTOMERS   Calculating churn is hard. Articles like Joel’s What is Churn? makes you feel you are never going to get it right. There are so many things that you need to take into account! Jason’s Cancellation rate in SaaS business models is more actionable, but you

  1. Author : mark@firstofficer.io
  2. December 11, 2019
WHY DO I NEED 3 DIFFERENT CHURN RATES?

Why do I need 3 different Churn Rates? Have you ever wondered why there are so many different Churn Rates? What’s the point? Let’s find out! Even though this article does not answer a direct business question, it’s important to understand how the Churn Rates work. When you understand the differences, you’ll be able to

  1. Author : mark@firstofficer.io
  2. January 15, 2015