Dictionary

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ARR - Annual Recurring Revenue

Revenue that renews or repeats annually. This could be contracted to renew or clients and customers renew on their own without a contract.

Beginning ARR - Beginning Annual Recurring Revenue

Recurring Revenue from the start of the period.

Cash Flow

Cash flow is the net movement of money in and out of your business over a given period. Everything you're paid minus everything you have to pay out.

The most important term for any entrepreneur, CEO, or business owner.

Profits are fungible. Cash is reality. A business can be profitable but still die because it doesn't have the money to make payroll on any given pay day.

If you don't have cash flow, you don't have a business.

Cross-Sell

Under construction

Expansions

Increase in revenue from upsells, cross-sells and organic expansion from existing customers.

Contractions

Loss of revenue from existing customers that downgrade, reduce their services or negotiate lower prices.

Churn

Lost recurring revenue from cancelled subscriptions.

ICP

Under Construction

Local Optimization Trap

Under Construction

See Premature Optimization Trap.

NRR - Net Recurring Revenue

NRR=((Beginning ARR+Expansions-Contractions-Churn)/Beginning ARR) x 100.

Revenue retained from existing customers over a period (usually the prior year). This includes upgrades/downgrades. It excludes revenue from new customers won in the same period.

Organic Expansion

Under construction

Premature Optimization Trap

A business is a system of interconnected and nested systems that is rate-limited by the weakest of those systems.

Optimizing a single system before you understand and measure what's happening with the individual systems of the business risks optimizing the wrong system, which creates more problems for the business instead of solving them.

See Local Optimization Trap.

Upsell

Under construction