Category: Glossary

Cost of Goods Sold is an important financial metric that represents the direct costs associated with producing goods that a company sells. It is a key component in determining a company’s gross profit and overall profitability. Understanding COGS helps businesses analyze how efficiently they are managing production costs and pricing their products. How to calculate…

Net Income is a key financial metric used to measure a company’s profitability. It represents the amount of money a company has left after all of its expenses have been deducted from its total revenue. How to calculate net income? Start with Revenue: This is the total amount of money a company earns from its…

SaaS Business Model The SaaS (Software as a Service) business model is about providing software over the internet instead of through physical copies or local installs. Customers subscribe to the software, usually paying monthly or yearly, instead of buying it outright. SaaS Company A SaaS company makes and offers software applications online using cloud technology.…

Revenue in SaaS Revenue in a SaaS (Software as a Service) business is the money the company has actually earned from providing its services, regardless of when the customer is billed. This revenue is recorded based on the company’s rules for recognizing revenue. Revenue Example Imagine a SaaS company signs a 3-year contract with a…

Operating expenses (OPEX) in SaaS (Software as a Service) companies are the ongoing costs needed to keep the business running smoothly. SaaS companies have unique OPEX due to their software-focused operations. Key OPEX Elements for SaaS Companies Server and Hosting Costs: Significant expenses for cloud hosting, data storage, and bandwidth, as SaaS companies rely heavily…

Operating expenses (OPEX) are the everyday costs a business incurs to keep running. These expenses are recorded in the accounting books when they happen and directly affect the company’s profits and cash flow. Unlike capital expenditures (CAPEX), which are for long-term assets that get depreciated over time, OPEX covers immediate costs. There’s no universal formula…

Negative Churn Rate Meaning A negative churn rate occurs when the revenue gained from existing customers (through upgrades, add-ons, or expansions) exceeds the revenue lost from customers leaving or downgrading. So, even after some customers leave, the overall revenue from existing customers still increases. This phenomenon is also known as “revenue expansion” or “negative revenue…

MAU Definition MAU stands for Monthly Active Users. It is a key metric in the tech and SaaS (Software as a Service) industries. MAU counts the number of unique users who engage with your product or service at least once within a given month. It’s important to remember that MAU tracks unique users, meaning each…

Deferred Revenue in SaaS Deferred revenue is the amount a SaaS (Software as a Service) company has billed its customers but hasn’t yet counted as actual revenue. SaaS companies don’t recognize all the revenue immediately when they bill a customer. Instead, they spread it out over the duration of the customer contract. It’s like saying,…

Customer Churn Customer churn, or the churn rate, is a key metric that shows how many customers a company loses over a certain period. This can be measured monthly, annually, or even daily. For businesses with subscription-based models, this metric is crucial as it directly impacts revenue and long-term profitability. Importance of Churn Rate The…