Glossary
Plain-English definitions of the SaaS revenue terms that matter: MRR, ARR, NRR, churn, expansion, ARPA, LTV, dunning and more, with formulas and further reading.
Annual contract value is the average yearly value of a customer contract, normalised to twelve months. A three-year deal is divided over its term. ACV helps compare deals of different lengths and sizes, and is mainly used for sales planning and segmentation rather than as a revenue figure.
Annual recurring revenue is the yearly value of a business’s active recurring subscriptions: the run-rate of contracted, repeating revenue if nothing changed. It excludes one-time fees. ARR is the headline size metric for annual-contract businesses, while monthly-billed businesses usually watch MRR alongside it.
Average revenue per account is the recurring revenue earned per active customer account in a period, usually monthly. It shows whether the business is moving up or down market and is a core input to lifetime value. ARPA and ARPU are close cousins, differing in whether the unit is an account or a user.
Bookings are the value of contracts signed, billings are what has been invoiced, and revenue is what has been earned by delivering the service. For a subscription business the three move on different timelines, so a signed multi-year deal can raise bookings today while revenue arrives gradually over its term.
CAC payback period is the number of months of gross profit from a new customer needed to recover what it cost to acquire them. A shorter payback means faster recovery and lower funding needs. It is a practical check on go-to-market efficiency that avoids the long-horizon assumptions in lifetime value.
Churn rate is the percentage of customers or recurring revenue lost over a period because subscriptions ended. It comes in two forms: logo churn counts accounts, revenue churn counts money. A single blended churn number hides which kind is happening and why, so it is best reported with its causes.
Cohort retention tracks groups of customers that started in the same period, such as a signup month, and shows how many, or how much of their revenue, remain over time. Comparing cohorts shows whether retention is improving and when in the customer lifecycle losses happen.
Contraction MRR is the monthly recurring revenue lost when existing customers downgrade, remove seats or reduce usage while remaining customers. It does not appear in logo churn, which makes it an easy early signal to miss, but it often precedes full cancellation.
Customer lifetime value estimates the total revenue, or ideally gross profit, a customer will generate over the whole relationship. In subscription businesses it is commonly modelled from average revenue per account and the churn rate. It is used to judge how much it is worth spending to acquire a customer.
Deferred revenue is money collected from customers for service not yet delivered, held as a liability on the balance sheet. When a customer pays for a year up front, the cash arrives immediately but the revenue is recognised gradually, month by month, as the service is provided.
Dunning is the process of recovering failed subscription payments through automatic retries and customer communication. It includes retrying a charge on a sensible schedule, emailing the customer to update their payment method and eventually pausing or cancelling the subscription if payment cannot be collected.
Expansion MRR is the additional monthly recurring revenue gained from existing customers through upgrades, extra seats, add-ons or higher usage. It is the main way a subscription business grows without acquiring new customers, and it feeds directly into net revenue retention.
Free trial conversion rate is the percentage of free trials that become paying subscriptions. It measures how well the product proves its value during the trial and how smooth the path to payment is. It is sensitive to trial length, whether a card is required and how qualified the signups are.
Grandfathered pricing keeps existing customers on an older price or plan after the list price changes. It protects relationships and avoids a churn spike, but it leaves revenue below current list and complicates the catalogue because several price versions stay live at once.
Gross revenue retention is the share of starting recurring revenue an existing customer base keeps over a period, counting only contraction and churn. Expansion is ignored, so GRR can never exceed 100 percent. It shows how leaky a revenue base is, independent of how well upsell performs.
Hybrid pricing combines a recurring base fee with variable charges, typically seats plus usage, or a platform fee plus overage above an included allowance. It gives the seller predictable baseline revenue and lets cost scale with consumption, while giving the customer a known minimum.
Involuntary churn is customer loss caused by failed payments rather than a decision to leave: expired cards, insufficient funds, bank declines. The customer often has no idea the subscription ended. Because the intent to stay exists, it is usually the most recoverable kind of churn.
Logo churn is the percentage of customer accounts that cancel in a period, regardless of how much each paid. It tells you how many relationships you are losing. Because every account counts equally, it can look alarming when many small customers leave even though little revenue goes with them.
Monthly recurring revenue is the predictable revenue a subscription business expects to earn each month from active subscriptions. Annual and quarterly plans are normalised to a monthly amount, and one-off fees such as setup or services are excluded. It is the base figure behind most SaaS growth and retention metrics.
Net revenue retention measures how much recurring revenue an existing customer base keeps and grows over a period, counting expansion and subtracting contraction and churn. Revenue from customers acquired during the period is excluded. An NRR above 100 percent means existing customers are growing faster than they leave.
Quote-to-cash is the end-to-end process from quoting a customer to collecting and recognising the revenue: quoting, contracting, provisioning, billing, collection and reporting. For subscription businesses it breaks easily at handoffs between sales, billing and finance, producing mismatches and delays.
Revenue churn is the percentage of recurring revenue lost in a period from cancellations and downgrades. Weighting by money rather than by account shows what the losses actually cost. Gross revenue churn counts only losses, while net revenue churn also subtracts expansion and can turn negative.
Revenue leakage is money a business is owed or should be charging but fails to collect: missed usage, unbilled changes, wrong discounts, expired promotions and unrecovered failed payments. It usually comes from gaps between systems rather than any one error, and it compounds quietly.
SaaS gross margin is revenue minus the direct cost of delivering the service (hosting, support, payment processing and similar), divided by revenue. It shows how much of each subscription dollar is left to fund growth and overhead, and it is the base for honest LTV and payback calculations.
Seat-based pricing charges a recurring fee per user licence. It is simple to explain and forecast, and revenue grows as a customer adds people. It works best when value rises with the number of users, and breaks when customers share logins or when value comes from outcomes rather than headcount.
Soft churn is the stage where a customer has stopped paying or using the product but has not formally cancelled. It covers failed payments inside a grace period and accounts that have gone quiet. Left alone it often becomes hard churn, so it is an early-warning signal rather than a loss yet.
Tiered pricing sells a product in packaged levels, such as Starter, Growth and Enterprise, each with a fixed price and feature or limit set. It can also mean volume tiers, where the unit price changes at quantity thresholds. Good tiers make the right plan obvious to each kind of customer.
Usage-based pricing charges customers according to how much of a product they consume, such as API calls, gigabytes or transactions, instead of a flat fee. Revenue scales with customer value, but it is less predictable than seat or plan pricing, so most businesses combine usage with a committed base.
These are the objects behind the metrics in Revvly, each with its own reference page in the docs.