ADSSystem

SaaS and Subscription Economics glossary

In one line

92 terms from SaaS and Subscription Economics, each defined in a sentence or two, with a link to the calculator that works the number out where one exists.

A11
Account Expansion

Any growth in revenue from an account you already have.

ACV

Short for annual contract value.

Annual Contract Value

What one contract is worth per year.

Annual Prepaid Revenue

A year paid upfront. Better cash position, shorter payback, usually a discount.

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Annual Recurring Revenue

Contracted subscription revenue over a year, normalised.

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ARPA

Average revenue per account. The B2B version, where one account holds many users.

ARPPU

Average revenue per paying user. Strips out the free tier.

ARPU

Average revenue per user, counting free users too.

ARR

Short for annual recurring revenue. Excludes one-off fees, and people include them anyway.

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ARR Growth Rate

The same annually.

Average Contract Value

The mean across all contracts. Watch the median too, because a few enterprise deals distort it.

B2
Billings

What you actually invoiced.

Bookings

The value of contracts signed. Not revenue yet.

C10
Burn Rate

The rate at which a business consumes cash, measured from bank balances rather than from the income statement. Gross burn is everything going out; net burn subtracts what comes in.

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Churn Cohort

Accounts grouped by when they left, to find what they had in common.

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Churn Revenue

Recurring revenue lost in the period.

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Churned ARR

Annual recurring revenue lost.

Churned MRR

Recurring revenue lost to cancellations.

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Committed ARR

Revenue under signed contract, including what has not started yet.

Consumption Pricing

Paying for what gets used, usually metered.

Contracted ARR

Another name for the same thing.

Contraction MRR

Recurring revenue lost to downgrades, without anyone leaving.

Contraction Rate

How much they shrank it.

Customer Acquisition Efficiency

How much new recurring revenue each unit of spend produced.

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D1
Deferred Revenue

Money collected for service not yet delivered. A liability, not income.

E4
Expansion ARR

Annual recurring revenue added by existing customers.

Expansion Cohort

Accounts grouped by how much they grew.

Expansion MRR

Extra recurring revenue from existing customers upgrading.

Expansion Rate

How much existing customers grew their spend.

F4
Feature-Based Pricing

Charging by which capabilities are unlocked.

Flat-Rate Pricing

One price for everything. Simple to sell, hard to grow revenue from.

Free Trial

Time-limited full access. Converts better than freemium and grows the base slower.

Fully Loaded CAC

Everything included: media, salaries, tools, commission. The only version finance recognises.

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G4
GDR

Short for gross dollar retention. The honest measure of whether customers stay.

Gross Dollar Retention

Revenue kept from existing customers, capped at one hundred percent.

Gross MRR Growth

Growth counting only additions. Flattering, and useless alone.

Gross Retention Rate

Customers or revenue kept, before expansion.

H1
Gross Revenue Retention

The share of opening recurring revenue still present at period end, counting only losses from churn and contraction. It cannot exceed 100 percent, which is what makes it the harsher of the two retention measures.

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Hybrid Pricing

A base fee plus usage. The most common model in modern software.

L5
Land and Expand

Winning a small foothold then growing inside the account. Lower initial acquisition cost, longer payback.

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Lead Velocity Rate

Month-on-month growth in qualified leads. A leading indicator of revenue.

Logo Churn

Customers leaving, counted as headcount.

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LTV

Lifetime value. Gross profit across the whole relationship, not revenue.

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LVR

Short for lead velocity rate.

M9
Marketing CAC

The portion coming from marketing.

Marketing-Led Growth

Growth driven by demand generation feeding self-serve signup.

MCV

Short for monthly contract value.

MLG

Short for marketing-led growth.

Monthly Contract Value

The same per month.

Monthly Prepaid Revenue

Month-by-month payment. Higher headline price, slower cash, higher churn.

Monthly Recurring Revenue

The same measure per month.

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MRR

Short for monthly recurring revenue.

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MRR Growth Rate

Percentage change in monthly recurring revenue.

N9
NDR

Short for net dollar retention. The number investors ask about first.

Net ARR Growth

Annual growth after churn and contraction.

Net Burn

Gross burn minus cash received in the same period. It is the figure that actually reduces the balance, so runway is always calculated from net burn rather than gross.

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Net Dollar Retention

Revenue kept including expansion. Above one hundred percent means the base grows without new customers.

Net MRR Growth

Growth after all losses are subtracted.

Net New ARR

The change in annual recurring revenue across a period, after new business and expansion are reduced by contraction and churn. It is the only one of the four movements that reaches the headline figure.

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Net New MRR

New plus expansion minus contraction and churn. The single number that says whether the month was good.

Net Retention Rate

The same including expansion.

New ARR

Annual recurring revenue from new customers.

New Customer CAC

What it costs to win a customer who never bought before.

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New MRR

Recurring revenue from customers who just arrived.

O1
Organic CAC

The cost behind customers who arrived without paid media. Never actually zero.

P7
Per-User Pricing

Another name for seat-based pricing.

Pipeline Efficiency

How much pipeline each unit of marketing spend created.

PLG

Short for product-led growth.

PQL

Product qualified lead. A user whose behaviour shows they are ready to pay.

Price Metric

The unit you charge against, such as seats, events or gigabytes. Choosing it badly caps the business.

Product-Led Growth

Growth driven by people using the product rather than by sales calls.

R6
Reactivated MRR

Revenue from customers who came back.

Reactivation Rate

The share of lost customers who returned.

Recurring Gross Margin

Margin on subscription revenue after hosting and support. Decides how much acquisition you can fund.

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Renewal Cohort

Contracts renewing in the same period, tracked together.

Revenue Churn

Money leaving. Higher than logo churn when your biggest accounts go, lower when your smallest do.

Revenue Recognition

Recording revenue as it is earned rather than when cash arrives.

S8
Runway

How many months of cash remain at the current net burn. It assumes nothing changes and that every dollar in the account is genuinely spendable, which is rarely true of money already committed to tax or suppliers.

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SaaS Economics

The financial logic of selling software by subscription, where you pay for the customer upfront and get paid back monthly.

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SaaS Metrics

The standard set of numbers subscription businesses run on.

Sales CAC

The portion of acquisition cost coming from sales salaries and commission.

Sales Velocity

Opportunities times deal size times win rate, divided by cycle length. The whole sales engine in one number.

Sales-Led Growth

Growth driven by a sales team working deals.

Seat Growth

Additional licences inside an existing account.

Seat-Based Pricing

Charging per licence. Predictable, and it punishes the customer for adding users.

SLG

Short for sales-led growth.

T2
Tiered Pricing

Packages at fixed price points.

Time to Product Value

How long before a new user gets something worth paying for.

U3
Usage Cohort

Accounts grouped by how heavily they use the product.

Usage Rate

How much of what they bought they actually use. Low usage is churn arriving late.

Usage-Based Pricing

Charging by consumption. Revenue scales with value delivered and becomes harder to forecast.