SaaS Jargon
Words, acronyms, and definitions that are useful to know in the world of SaaS.
Annual Contract Value
(ACV)
The amount a customer pays in a year. This would include any fees, one time or not.
Annual Recurring Revenue
(ARR)
The money coming in from subscriptions over 12 months.
Average Revenue Per User
(ARPU)
The revenue from all subscriptions divided by the number of users. Also known as ARPC (customer) or ARPA (account).
Churn
The rate in which customers unsubscribe.
Cohort
A grouping of customers. This might be customers who signed up at the same time or went through a certain marketing experiment or pricing plan.
Cost Of Goods Sold
(COGS)
The cost to the computer to produce and deliver their product.
Customer Acquisition Cost
(CAC)
The cost in marketing and sales to get a new customer.
Marketing Qualified Lead
(MQL)
A lead that has expressed interest due to marketing efforts but not yet validated by sales.
Monthly Recurring Revenue
(MRR)
The money coming in from subscriptions over 1 month.
Profit
The difference between revenue and expenses.
Revenue
The income of a company, mainly what customers pay.
Sales Qualified Lead
(SQL)
A lead that has been qualified by Marketing, accepted by Sales, and is ready to be worked on in order to convert to a customer.
Search Engine Optimization
(SEO)
Inprovements made to a website to better rank on search engines.
Service Level Agreement
(SLA)
Frequently a contractual agreement between a vendor and customer. Dictates the type of service expected, typically rooted in metrics, as well as penalties for when the vendor cannot meet the level of service.
Software-as-a-Service
(SaaS)
A business model where software is hosted in the cloud and access is given to customers on a subscription basis.