The metric dictionary.

Definition: The normalized monthly value of all active recurring subscriptions.

Formula: Σ (active subscription monthly value)

Numerator: Sum of monthly-normalized subscription fees

Period: Point-in-time (month end)

Data inputs: Billing system subscription records

Included: Recurring subscription fees, recurring seat/usage commitments

Excluded: One-time fees, implementation charges, non-recurring services, taxes collected

Interpretation: The core measure of subscription scale. Direction and composition matter more than the single number.

Common mistakes: Including one-time revenue; counting annual prepayments as one month of MRR ×12 error; mixing bookings with revenue.

Verify against: SaaS metric conventions (e.g., published investor reporting guides); reconcile to billing-system export.

Definition: Annualized value of recurring revenue.

Formula: ARR = MRR × 12

Numerator: MRR

Period: Point-in-time

Data inputs: MRR

Included: Recurring revenue only

Excluded: Services, one-time fees

Interpretation: A run-rate, not a forecast. Assumes today's MRR persists for a year.

Common mistakes: Treating ARR as guaranteed future revenue; comparing ARR to recognized (GAAP) revenue.

Verify against: SaaS reporting conventions; reconcile ARR/12 to MRR.

Definition: Reconciliation of beginning MRR to ending MRR through its five movement components.

Formula: Ending = Beginning + New + Expansion + Reactivation − Contraction − Churned

Period: Monthly

Data inputs: Subscription change events by type

Included: All recurring revenue movements

Excluded: FX remeasurement (shown separately if material)

Interpretation: Shows whether growth comes from new logos or existing accounts, and how much is lost to churn.

Common mistakes: Double-counting an upgrade as churn + new; letting the bridge fail to reconcile to reported MRR.

Verify against: Automated check: bridge must sum exactly each month (validated in scripts/validate.ts).

Definition: Share of beginning-of-period recurring revenue retained, ignoring expansion.

Formula: GRR = (Beginning MRR − Contraction − Churned) / Beginning MRR

Numerator: Beginning MRR − contraction − churned MRR

Denominator: Beginning MRR

Period: Monthly (annualized for benchmarks)

Data inputs: MRR bridge components

Included: Contraction and churn from existing customers

Excluded: New, expansion, and reactivation MRR

Interpretation: Measures product stickiness. Capped at 100% by definition.

Common mistakes: Including expansion (that is NRR); comparing monthly GRR to annual benchmarks without annualizing.

Verify against: SaaS metric conventions; cross-check against cohort revenue.

Definition: Revenue retained from existing customers including expansion.

Formula: NRR = (Beginning MRR + Expansion − Contraction − Churned) / Beginning MRR

Numerator: Beginning MRR + expansion − contraction − churned

Denominator: Beginning MRR

Period: Monthly (annualized for benchmarks)

Data inputs: MRR bridge components

Included: Existing-customer movements only

Excluded: New-customer MRR

Interpretation: Above 100% means existing customers grow even before new sales.

Common mistakes: Including new business; cherry-picking cohorts.

Verify against: SaaS metric conventions; reconcile to bridge components.

Definition: Share of customers lost in a period.

Formula: Logo churn = Churned customers / Beginning customers

Numerator: Customers cancelled in period

Denominator: Customers at period start

Period: Monthly

Data inputs: Customer status records

Included: Full cancellations

Excluded: Downgrades (contraction), pauses if reactivation is tracked

Interpretation: Customer-count attrition; compare with revenue churn to see whether small or large accounts are leaving.

Common mistakes: Using ending customer count as denominator; mixing logo and revenue churn.

Verify against: Billing-system cancellation report.

Definition: Share of MRR lost to cancellations in a period.

Formula: Revenue churn = Churned MRR / Beginning MRR

Numerator: MRR from cancelled subscriptions

Denominator: Beginning MRR

Period: Monthly

Data inputs: MRR bridge

Included: Cancelled subscription MRR

Excluded: Contraction (reported separately here — methodology disclosed)

Interpretation: Weighting churn by revenue shows the financial severity of attrition.

Common mistakes: Netting expansion against churn and calling it churn; inconsistent contraction treatment across reports.

Verify against: Methodology note in this dictionary; validated against bridge.

Definition: Share of revenue remaining after cost of revenue.

Formula: Gross margin = (Revenue − Cost of revenue) / Revenue

Numerator: Revenue − COGS (hosting, support delivery, payment processing, third-party usage fees)

Denominator: Revenue

Period: Monthly / trailing

Data inputs: P&L

Included: Hosting, support staff serving customers, payment processing, embedded third-party costs

Excluded: R&D, sales & marketing, G&A

Interpretation: SaaS gross margins typically 70–85%; determines how much of each revenue dollar can fund operations.

Common mistakes: Leaving support or payment processing out of COGS; comparing to companies with different COGS definitions.

Verify against: COGS composition disclosed in assumptions register; reconcile to P&L.

Definition: Revenue less all variable costs, per unit or in aggregate.

Formula: Contribution margin = Revenue − Variable costs; ratio = CM / Revenue

Numerator: Revenue − variable costs (COGS + variable selling costs)

Denominator: Revenue (for the ratio)

Period: Monthly / per plan

Data inputs: P&L with fixed/variable cost split

Included: Costs that scale with revenue or customer count

Excluded: Fixed payroll, rent, fixed tooling

Interpretation: Funds fixed costs; drives break-even. A plan can have high revenue but weak contribution margin (e.g., heavy support).

Common mistakes: Confusing contribution margin with gross margin; treating semi-fixed costs as variable.

Verify against: Fixed/variable classification disclosed in assumptions register.

Definition: Average sales & marketing cost to acquire one new customer.

Formula: CAC = Sales & marketing spend / New customers acquired

Numerator: S&M spend in period (incl. S&M payroll)

Denominator: New customers in same period

Period: Monthly / quarterly

Data inputs: P&L, CRM

Included: Advertising, S&M payroll, tools, commissions

Excluded: Customer-success cost of existing accounts

Interpretation: Compare to first-year gross profit per account, not revenue.

Common mistakes: Excluding S&M salaries; mismatched periods between spend and the customers it produced.

Verify against: Methodology note (fully-loaded CAC); reconcile spend to P&L.

Definition: Expected gross profit from an average customer over its lifetime.

Formula: LTV = (ARPA × Gross margin %) / Monthly revenue churn rate

Numerator: Monthly gross profit per account

Denominator: Monthly revenue churn rate

Period: Derived from trailing averages

Data inputs: ARPA, gross margin, churn

Included: Gross profit only

Excluded: Expansion upside (conservative simple model — methodology disclosed)

Interpretation: Highly sensitive to the churn input. Treat as an order-of-magnitude planning number.

Common mistakes: Using revenue instead of gross profit; using an unstable one-month churn figure; LTV:CAC below ~3 treated as fine.

Verify against: Methodology disclosed; sensitivity shown in dashboard.

Definition: Months of gross profit needed to recover the cost of acquiring a customer.

Formula: CAC payback = CAC / (ARPA × Gross margin %)

Numerator: CAC

Denominator: Monthly gross profit per account

Period: Months

Data inputs: CAC, ARPA, gross margin

Included: Gross-margin basis

Excluded: Expansion revenue

Interpretation: Under ~12 months is efficient for SMB SaaS; long paybacks strain cash even when LTV looks fine.

Common mistakes: Using revenue payback (flatters the number); ignoring onboarding cost.

Verify against: SaaS conventions; recompute from dashboard inputs.

Definition: Total cash paid out per month.

Formula: Gross burn = Total cash outflows

Numerator: All operating cash payments

Period: Monthly

Data inputs: Cash ledger / bank activity

Included: Payroll, vendors, COGS payments

Excluded: Non-cash charges (D&A, accruals)

Interpretation: Worst-case monthly outflow if collections stopped.

Common mistakes: Using P&L expenses (accruals) instead of cash paid.

Verify against: Bank-activity reconciliation.

Definition: Cash consumed per month after collections.

Formula: Net burn = Cash paid − Cash collected

Period: Monthly (smoothed over 3 months)

Data inputs: Cash ledger

Included: All operating cash flows

Excluded: Financing inflows (shown separately)

Interpretation: Positive = consuming cash. The runway driver.

Common mistakes: Letting one large annual prepayment month distort the trend; mixing in financing flows.

Verify against: Opening→closing cash reconciliation (validated).

Definition: Months until cash reaches zero at current net burn.

Formula: Runway = Cash balance / Average net burn

Numerator: Closing cash

Denominator: Trailing 3-month average net burn

Period: Months

Data inputs: Cash, burn

Included: Operating burn

Excluded: Unclosed fundraising, undrawn credit

Interpretation: A planning estimate, not a guarantee — burn changes with every hire and pricing decision.

Common mistakes: Using best-month burn; ignoring committed future costs (hires, contracts).

Verify against: Scenario engine shows runway under changed assumptions.

Definition: MRR at which contribution covers all fixed costs.

Formula: Break-even MRR = Fixed monthly costs / Contribution margin ratio

Numerator: Fixed monthly operating costs

Denominator: Contribution margin ratio

Period: Monthly

Data inputs: Cost structure split fixed/variable

Included: All fixed costs incl. fixed payroll

Excluded: One-time costs (noted separately)

Interpretation: With current MRR growth, implies an estimated break-even date.

Common mistakes: Using gross margin instead of contribution margin; forgetting that hires raise the break-even bar.

Verify against: Classical CVP analysis; recompute in dashboard.

Definition: Present value of a project's cash flows minus the initial investment.

Formula: NPV = Σ CFt / (1+r)^t, t = 0…n (CF0 = −investment)

Period: Project life (5 years here)

Data inputs: Cash-flow forecast, discount rate

Included: Incremental cash flows only

Excluded: Sunk costs, non-cash accounting charges

Interpretation: Positive NPV adds value at the chosen discount rate. Distinct from ROI and from net absolute return (undiscounted sum).

Common mistakes: Discounting year-0 investment; conflating NPV with ROI or payback; using accounting profit instead of cash flow.

Verify against: Standard corporate-finance texts; validated against independent recomputation in scripts/validate.ts.

Definition: Discount rate at which NPV equals zero.

Formula: 0 = Σ CFt / (1+IRR)^t

Period: Project life

Data inputs: Same cash flows as NPV

Included: —

Excluded: —

Interpretation: Compare to the hurdle rate. Can mislead with non-conventional cash flows (multiple sign changes) — NPV is decisive.

Common mistakes: Ranking mutually exclusive projects by IRR alone; annual/monthly period confusion.

Verify against: Bisection solution validated by recomputing NPV(IRR) ≈ 0.

Definition: Time for cumulative cash inflows to recover the investment (undiscounted).

Formula: First t where Σ CF0..t ≥ 0, interpolated

Period: Years

Data inputs: Project cash flows

Included: Undiscounted flows (methodology disclosed)

Excluded: Time value of money; post-payback flows

Interpretation: A liquidity-risk measure, not a profitability measure. Use with NPV, never instead of it.

Common mistakes: Treating short payback as proof of value; ignoring cash flows after payback.

Verify against: Standard capital-budgeting references.

Definition: Current assets over current liabilities.

Formula: Current ratio = Current assets / Current liabilities

Numerator: Cash + AR + prepaid

Denominator: AP + accrued payroll + deferred revenue

Period: Point-in-time

Data inputs: Balance sheet

Included: All current items

Excluded: —

Interpretation: In SaaS, deferred revenue inflates current liabilities but is settled by service delivery, not cash — read alongside the cash ratio.

Common mistakes: Treating deferred revenue like a cash obligation; benchmark ratios from inventory businesses.

Verify against: Standard ratio conventions; SaaS caveat disclosed.

Definition: Liquid current assets over current liabilities.

Formula: Quick ratio = (Cash + AR) / Current liabilities

Numerator: Cash + receivables

Denominator: Current liabilities

Period: Point-in-time

Data inputs: Balance sheet

Included: Cash, AR

Excluded: Prepaid expenses (no inventory in SaaS)

Interpretation: Same SaaS deferred-revenue caveat as the current ratio.

Common mistakes: Confusing with the 'SaaS quick ratio' (growth metric) — different formula entirely.

Verify against: Standard ratio conventions.

Definition: Share of assets financed by liabilities.

Formula: Debt ratio = Total liabilities / Total assets

Numerator: Total liabilities

Denominator: Total assets

Period: Point-in-time

Data inputs: Balance sheet

Included: All liabilities incl. deferred revenue

Excluded: —

Interpretation: For SaaS, disclose how much of 'debt' is actually deferred revenue.

Common mistakes: Reading high deferred revenue as leverage risk.

Verify against: Standard ratio conventions.

Definition: Asset cost less accumulated depreciation/amortization and impairment.

Formula: Carrying amount = Cost − Accumulated D&A − Impairment

Period: Point-in-time

Data inputs: Asset register

Included: Capitalized costs

Excluded: Internally generated brand value

Interpretation: Book value, not market value.

Common mistakes: Depreciating below residual value; continuing to amortize a fully-recovered asset.

Verify against: Accounting standards on PP&E and intangibles; treatments must be confirmed by a qualified accountant.

Definition: Even allocation of depreciable cost over useful life.

Formula: Periodic charge = (Cost − Residual value) / Useful life

Numerator: Cost − residual value

Denominator: Useful life (months)

Period: Monthly

Data inputs: Asset register

Included: Capitalizable acquisition costs (purchase, delivery, installation)

Excluded: Repairs, maintenance, training

Interpretation: Simplest method; alternatives (declining balance, units of production) change timing, not total.

Common mistakes: Depreciating land; expensing capitalizable install costs or capitalizing maintenance.

Verify against: Accounting standards; classification requires professional confirmation.

Definition: Excess of carrying amount over recoverable amount.

Formula: Impairment = Carrying amount − Recoverable amount (when positive)

Period: When indicators exist

Data inputs: Carrying amounts, recoverable-amount estimates

Included: Higher of fair value less costs to sell and value in use (as recoverable amount)

Excluded: —

Interpretation: The dashboard flags indicators; measurement and recognition are decisions for the company's qualified accountant.

Common mistakes: Automatic write-downs without assessment; ignoring reversal rules that differ across frameworks.

Verify against: Accounting standards on impairment; professional review required.

Definition: Total annual cost of employment beyond gross salary.

Formula: Salary + Bonus + Employer taxes/contributions + Benefits (+ reserves)

Period: Annual / monthly

Data inputs: Compensation data, jurisdiction burden estimates

Included: Employer payroll taxes, statutory contributions, benefits, equipment/recruiting as first-year one-time

Excluded: Office overhead allocation (methodology choice, disclosed)

Interpretation: Typically 1.15–1.4× salary depending on jurisdiction; the affordable-hire question uses this number, not salary.

Common mistakes: Budgeting at gross salary; applying one country's burden rates to another.

Verify against: Jurisdiction estimates must be confirmed with qualified payroll/tax professionals.

Definition: Bridge from accounting profit to estimated taxable income via permanent and temporary differences.

Formula: Taxable income ≈ Accounting profit + Permanent differences + Temporary differences

Period: Fiscal year

Data inputs: P&L, adjustment schedule

Included: Non-deductible expenses, timing differences (depreciation, provisions, R&D treatment)

Excluded: Jurisdiction-specific rules (adviser input required)

Interpretation: Permanent differences never reverse; temporary differences create deferred-tax items that require professional review.

Common mistakes: Applying statutory rate to accounting profit; hard-coding outdated rates; treating estimates as filings.

Verify against: This is a planning estimate only — all figures must be confirmed by a qualified tax adviser.