Revenue Metrics

Business Revenue Metrics

Let's consider a hypothetical SaaS startup called RedRocket, which sells software for $12,000 per year and asks its customers to pay each quarter. On the 15th day of January, one customer agrees to pay RedRocket $12,000 for a one-year contract. The startup doesn't sell any more software for the next 12 months. The table below demonstrates the differences in bookings, monthly recurring revenue (MRR), revenue, and billings.

Month Jan Feb Mar Apr May Jan
ACV bookings 12,000
MRR 1,000 1,000 1,000 1,000 1,000 0
Recognized revenue 516 1,000 1,000 1,000 1,000 484
Billings/cash collections 3000 3000

Annual contract value bookings (ACV bookings)

Bookings are the amount of money customers have committed to spend with the business. The sum total of future spend is booked in the month a customer signs a contract. Companies with only 12-month contracts can report ACV bookings; companies with other length contracts, both shorter and longer, report total contract value (TCV) bookings. Sometimes companies normalize TCV into an annual number to report ACV.

Monthly recurring revenue (MRR)

The company records $1,000 in MRR in January. Recurring revenue is a metric used by subscription businesses, those companies that contract their customers over some period of time. The MRR is the annualized spend of all customers divided by 12. RedRocket reports MRR at the end of each month. So in a year, assuming the customer ...

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