Glossary of key SaaS terms

(Average) Annual Contract Value

ACV

The average value of a contract or agreement between a company and its customer over a year.

Account Executive

AE

A sales professional responsible for managing relationships with existing clients and acquiring new customers.

Account Manager

AM

A person who oversees and manages the relationship between a company and its clients or customer accounts.

Annual Recurring Revenue

ARR

The total revenue generated by a subscription-based business model over a year, including both new and existing customers.

Anti-Money Laundering

AML

AML refers to a set of regulations, policies, and procedures designed to prevent and detect money laundering activities. Financial institutions and businesses implement AML measures to ensure they are not involved in illegal financial transactions. AML practices are essential in the fintech and other highly regulated spaces.

Average Order Value

AOV

AOV represents the average monetary value of orders placed by customers in a specific time frame. It is calculated by dividing the total revenue generated from orders by the number of orders received during that period. AOV is often used by businesses to evaluate their sales performance and customer spending habits.

Average Revenue per Account

ARPA

The average amount of revenue generated per customer or account.

Average Revenue per User

ARPU

Average Revenue per User is a metric that calculates the average revenue generated by each user or customer within a specific timeframe. ARPU helps businesses assess the average financial value attributed to individual users or customers, providing insights into pricing, monetization strategies, and overall revenue generation.

Average Selling Price

ASP

The average price at which a company sells its products or services.

Average Transaction Value

ATV

ATV refers to the average value of individual transactions made by customers. It is calculated by dividing the total value of transactions by the number of transactions conducted within a given time period. ATV helps businesses analyze customer behavior and identify trends in purchasing patterns.

Burn rate

No commonly used abbreviation

The rate at which a company is spending its available funds or capital, typically measured as a monthly or annual amount. It indicates the company's cash consumption rate.

Business / Sales Development Rep

BDR / SDR

A sales professional responsible for identifying and developing new business opportunities and leads for a company.

Business to Business

B2B

The process of conducting business transactions between two companies or organisations.

Business to Business to Consumer

B2B2C

A business model where a company sells its products or services to another business, which then sells them to consumers.

Business to Consumer

B2C

The process of conducting business transactions directly between a company and individual consumers.

Channel partner

No commonly used abbreviation

An external organisation or individual that collaborates with a company to sell its products or services, often through a distribution channel.

Community-led growth

No commonly used abbreviation

A strategy in which a company fosters and relies on its community of users or customers to drive growth, often through word-of-mouth and organic referrals.

Contracted Annual Recurring Revenue

CARR

The total value of recurring revenue that a company has contracted to receive from its customers over a year.

Cost of Sales

COS

The direct costs associated with producing or delivering a product or service, including materials, labour, and overhead expenses.

Customer Acquisition Cost

CAC

The total cost a company incurs to acquire a new customer, including marketing and sales expenses.

Customer Support/Success

CS

The department or team responsible for providing assistance, guidance, and support to customers, ensuring their satisfaction and success with the company's products or services.

Customer experience

CX

Customer experience refers to the overall impression and perception a customer has about a company or brand based on their interactions and engagement throughout their journey. It encompasses all touchpoints, from initial contact to post-purchase support, and focuses on delivering positive, satisfying, and memorable experiences to customers.

Customer-led growth

CLG

A growth strategy focused on maximising customer satisfaction and retention to drive organic growth through customer referrals, upselling, and cross-selling.

Daily Active Users

DAU

Daily Active Users refers to the number of unique users who engage or interact with a product, service, or platform on a daily basis. DAU is a metric often used to measure user engagement and usage patterns, providing an indication of the product's popularity and stickiness.

Due Diligence

DD

The process of conducting a thorough investigation and evaluation of a company, its financials, operations, legal aspects, and other relevant factors before entering into a business transaction, such as an investment, acquisition, or partnership.

Earnings Before Interest Tax Depreciation and Amortization

EBITDA

A financial metric that represents a company's profitability by excluding interest, taxes, depreciation, and amortization expenses from its earnings.

Free Cash Flow

FCF

The cash generated by a company's operations after accounting for capital expenditures and working capital requirements.

Freemium

No commonly used abbreviation

A business model where a company offers a basic version of its product or service for free, with the option to upgrade to a premium or paid version with additional features or functionality.

Full Time Employee

FTE

An FTE refers to an individual who is employed by a company or organization and works the standard or designated number of hours considered full-time for their occupation or industry. The specific number of hours may vary depending on local labor regulations or company policies, but it typically ranges from 35 to 40 hours per week.

General Data Protection Regulation

GDPR

GDPR is a comprehensive data protection and privacy regulation implemented by the European Union (EU) in May 2018. The GDPR sets out rules and guidelines for the collection, processing, storage, and transfer of personal data of individuals within the EU. All companies in the SaaS field that operate in Europe, or have a service that is used by EU citizens, are subject to this regulation. While we don't go into specific regulations in the GTMF toolkit, we encourage all companies to keep GDPR, and other similar regulations, in mind.

General and Administrative

G&A

The category of expenses incurred by a company for non-production-related functions, including administration, management, legal, and other support services.

Generally Accepted Accounting Principles

GAAP

Commonly accepted set of accounting principles originating in the US. These do not encompass all SaaS metrics.

Go To Market

GTM

The strategy and actions taken by a company to bring its product or service to market and acquire customers.

Go to Market Fit

GTMF

The stage at which a company has found a target market and developed a product or service that meets the needs of that market.

Go to Market Motion

The strategic approach and plan that a company uses to bring its product or service to the market and acquire customers. (See section 1 in the GTMF toolkit)

Gross Churn

GC

The total percentage or number of customers lost during a specific period, without considering any revenue or expansion from existing customers.

Gross Dollar Retention

GDR

The total revenue retained from existing customers after accounting for churn, without factoring in any expansion revenue.

Gross Margin

GM

The percentage difference between a company's revenue and the cost of goods sold, representing the profitability of each sale before operating expenses.

Gross Profit

GP

The total revenue minus the direct costs associated with producing or delivering a product or service.

Ideal Customer Profile

ICP

A detailed description of the characteristics and attributes of the ideal customer that a company wants to target and serve.

Key Performance Indicator

KPI

A measurable value that indicates the performance and progress of a specific objective or goal within an organization.

Know Your Customer

KYC

KYC is a process through which businesses verify the identity of their clients or customers. It involves collecting and assessing customer information to ensure compliance with regulatory requirements, prevent fraud, and mitigate the risk of financial crimes.

Last Twelve Months

LTM

The previous twelve-month period, often used for financial reporting or performance analysis.

Leading Indicators of Retention

LIR

Metrics or factors that provide insights into the likelihood of customer retention, allowing companies to take proactive measures to improve retention rates.

Lifetime Value

LTV

The predicted total value of a customer over their entire relationship with a company, including revenue from repeat purchases and potential upselling or cross-selling opportunities.

Magic Number

No commonly used abbreviation

A metric used to assess the efficiency and effectiveness of a company's sales and marketing efforts, typically by comparing the ratio of sales and marketing expenses to revenue growth.

Marketing Qualified Lead

MQL

A Marketing Qualified Lead is a potential customer who has shown interest in a company's offerings and meets certain criteria set by the marketing team. MQLs are considered prospects who are likely to be receptive to marketing efforts and require further nurturing before being passed on to the sales team.

Minimum Viable Product

MVP

A basic version of a product that has enough features to be released to early customers for validation and feedback, with the goal of learning and iterating based on user input.

Monthly Active Users

MAU

Monthly Active Users denotes the number of unique users who engage or interact with a product, service, or platform within a month. MAU is a widely used metric to measure the size and growth of user bases, indicating the level of user adoption and retention.

Monthly Recurring Revenue

MRR

The predictable and recurring revenue generated from subscription-based products or services on a monthly basis.

Net Dollar Retention

NDR

The total revenue retained from existing customers after accounting for churn, as well as expansion revenue from upselling, cross-selling, or price increases.

Net Revenue Retention

NRR

The total revenue retained from existing customers after accounting for churn, expansion revenue, and contraction revenue from downsells or discounts.

Net churn

NC

The net percentage or number of customers lost during a specific period, taking into account the revenue gained from existing customers through expansion or upselling.

Net promoter score

NPS

A measure of customer satisfaction and loyalty based on a survey question that asks customers to rate their likelihood of recommending a company or product to others.

Next Twelve Months

NTM

The upcoming twelve-month period, often used for financial forecasting or projecting future performance.

Non-recurring revenue

No commonly used abbreviation

Revenue generated from one-time or sporadic sources, such as project-based sales, one-time fees, or ad-hoc services.

Product Community Fit

PCF

Product community fit: a level of community engagement with a scaling software project, proven by growth in active contributors over time

Product Led Growth

PLG

A growth strategy in which a company's product or service drives user acquisition, adoption, and expansion, often through self-service and viral user experiences.

Product Market Fit

PMF

The stage at which a product or service satisfies the needs and demands of a specific target market, resulting in significant customer adoption and traction.

Product Qualified Lead

PQL

A Product Qualified Lead is a potential customer who has demonstrated a strong interest in a product by engaging with the product itself. PQLs are identified based on their product usage, such as trial sign-ups, feature adoption, or other relevant actions, indicating their readiness to be considered as a sales opportunity.

Profit and Loss

P&L (sometimes PnL)

PnL refers to a financial statement that summarizes the revenues, costs, and expenses incurred during a specific period. It shows the net profit or loss generated by a business or investment.

Recurring revenue

No commonly used abbreviation

Revenue generated from ongoing, regular sources such as subscriptions, maintenance fees, or service contracts.

Repeating revenue

No commonly used abbreviation

Also referred to as re-occuring revenue, this is revenue generated from customers who make repeat purchases or use a company's products or services on a regular basis.

Research and Development

R&D

The activities and investments aimed at developing new products, technologies, or innovations within a company.

Rule of 40

No commonly used abbreviation

A benchmark used to assess the financial health and growth potential of a software company, where the sum of the company's revenue growth rate and profit margin should be at least 40%.

Run-Rate

RR

An estimate or projection of future financial performance based on the current or recent period's results extrapolated over a full year.

Sales Qualified Lead

SQL

A Sales Qualified Lead is a potential customer who has been identified as having a high likelihood of making a purchase. SQLs have shown interest, engaged with sales activities, and meet specific criteria defined by the sales team, indicating their readiness to be approached by the sales team for conversion.

Sales and Marketing

S&M

The combined efforts and activities of a company's sales and marketing teams to generate leads, convert them into customers, and drive revenue.

Service-level agreements

SLAs

Service-level agreements are contracts or agreements between a service provider and a customer that define the level of service expected. SLAs outline specific performance targets, such as response times, uptime, and service quality, and provide remedies or penalties if those targets are not met.

Serviceable Addressable Market

SAM

The specific portion of the total addressable market (TAM) that a company can realistically target and serve with its product or service.

Serviceable Obtainable Market

SOM

The portion of the serviceable addressable market (SAM) that a company can realistically capture and serve based on its resources, capabilities, and market penetration potential.

Software-as-a-Service

SaaS

SaaS stands for Software-as-a-Service. It refers to a software distribution model where applications are hosted by a provider and accessed by customers over the internet on a subscription basis.

Target Market

TM

The specific group of customers or market segment that a product or service is intended to serve and reach.

Time to Value

TTV

Time to Value refers to the amount of time it takes for a customer or user to realize the full value or benefit of a product or service after the initial interaction or onboarding. It is a critical metric that measures the efficiency and effectiveness of a product in delivering value and achieving customer satisfaction.

Total Addressable Market

TAM

The entire potential market for a product or service, representing the maximum revenue opportunity if a company captured 100% market share.

Total Contract Value

TCV

The Total Contract Value represents the total revenue expected from a customer during the duration of their contract.

User Experience

UX

User Experience encompasses the overall experience and satisfaction a user has while interacting with a product, system, or service. UX focuses on designing and optimizing the usability, accessibility, and enjoyment of the user journey, aiming to create positive and meaningful experiences that meet user needs and expectations.

User Interface

UI

UI is the graphical and interactive layer of a software application or website that enables users to interact with and navigate through the system, aiming to deliver an engaging, intuitive, and visually appealing user experience.

Value-based pricing

VBP

A pricing strategy where the price of a product or service is set based on the perceived value it provides to customers, rather than solely considering production costs or market competition. The price reflects the benefits and outcomes delivered to customers.

Ways of Working

WoW

WoW defines the set of practices, processes, and principles that govern how individuals and teams collaborate and perform their work within an organization.

Week over Week

WoW

WoW is a term used to compare data or metrics between two consecutive weeks. It is commonly used in business and finance to track changes in performance, such as sales, revenue, or customer engagement, over a one-week period. WoW analysis helps identify trends, seasonal variations, and short-term fluctuations in key indicators.

Weekly Active Users

WAU

Weekly Active Users represents the number of unique users who engage or interact with a product, service, or platform within a week. WAU is a metric similar to DAU but provides a broader view of user activity over a slightly longer timeframe.

Willingness-to-pay

WTP

The extent to which customers are willing and able to pay a certain price for a product or service, often determined through market research and customer feedback.