- ACV
- Annual Contract Value — the annualised revenue of a customer contract. SaaS vendors report ACV to smooth out multi-year deals.
- API rate limit
- Cap on requests per second/minute an API accepts. Higher limits are usually gated to higher pricing tiers.
- ARPU
- Average Revenue Per User — total revenue divided by active users. Used to measure monetisation efficiency.
- ARR
- Annual Recurring Revenue — total subscription revenue normalised to 12 months. The primary SaaS growth metric.
- Annual prepay discount
- 10–25% discount for paying a year upfront vs. monthly. Standard for B2B SaaS.
- Auto-renewal
- Contract clause that renews the subscription automatically. Check the cancellation window (often 30–60 days before renewal).
- CAC
- Customer Acquisition Cost — total sales + marketing spend divided by new customers acquired. CAC payback under 12 months is ideal for SaaS.
- CAC payback
- Months needed to recover CAC from gross profit. 12-month payback is typical; 18+ signals inefficiency.
- CPA
- Cost Per Acquisition — paid marketing cost to acquire one customer. Component of CAC.
- CSM
- Customer Success Manager — post-sale role managing retention, expansion, and support for mid-market or enterprise accounts.
- Churn rate
- The percentage of customers who cancel in a given period. Net revenue churn subtracts expansion revenue from lost revenue.
- Click-through agreement
- Contract accepted by clicking an accept button. Binds your company even without a signature.
- DAU/MAU
- Daily Active Users / Monthly Active Users. Engagement ratio; 20%+ is strong for B2B SaaS.
- DPA
- Data Processing Agreement — contract specifying how a vendor handles personal data under GDPR/privacy laws.
- Data residency
- Geographic location where data is stored. Critical for GDPR, Australian Privacy Principles, and regulated industries.
- EULA
- End User License Agreement — contract governing software usage. Standard in consumer and SMB SaaS.
- Expansion revenue
- New ARR from existing customers via upsells, cross-sells, or seat expansion. Key to high NDR.
- Free trial vs free plan
- Trials expire (7–30 days). Free plans never do, but usually have feature or usage limits.
- Freemium
- A pricing model with a free tier alongside paid plans. Common in developer and productivity SaaS.
- Gross margin
- Revenue minus COGS (hosting, support, payment fees) divided by revenue. SaaS benchmark: 70–85%.
- LTV
- Customer Lifetime Value — average revenue per customer over their entire relationship. Should exceed 3× CAC.
- MQL
- Marketing Qualified Lead — a lead that is engaged enough with marketing content to be handed to sales.
- MRR
- Monthly Recurring Revenue — normalised monthly subscription revenue. ARR ÷ 12.
- MSA
- Master Service Agreement — top-level contract governing the customer-vendor relationship. Usually paired with an Order Form.
- Migration cost
- Time + money to move data/users from one SaaS to another. Can exceed 1 year of subscription savings.
- Multi-tenancy
- SaaS architecture where one instance serves multiple customers. Keeps costs low; can raise noisy-neighbour concerns.
- NPS
- Net Promoter Score — a customer satisfaction metric measuring likelihood to recommend. SaaS benchmark: 30+.
- Net Dollar Retention
- NDR — revenue from existing customers vs. one year ago. 120%+ is elite SaaS.
- OAuth
- Authorisation protocol used for third-party app access. Scopes limit what the integrating app can do.
- PLG
- Product-Led Growth — acquisition model where the product drives sign-ups (vs. sales-led). Examples: Slack, Notion, Figma.
- POC
- Proof of Concept — a limited-scope trial to validate technical fit. Usually required for enterprise SaaS.
- Price grandfathering
- Keeping existing customers on old (cheaper) pricing when new pricing launches. Not always honoured.
- Procurement lead time
- Weeks from vendor selection to signed contract. Enterprise SaaS averages 45–90 days.
- RBAC
- Role-Based Access Control — users grouped into roles (admin, editor, viewer) with specific permissions.
- Rule of 40
- Growth rate % + profit margin % >= 40. A composite SaaS health metric. Public SaaS companies target this.
- SAML
- Security Assertion Markup Language — protocol for SSO. Required for most enterprise IT approvals.
- SCIM
- System for Cross-domain Identity Management — protocol for automatically provisioning and deprovisioning users.
- SLA
- Service Level Agreement — contractual uptime guarantee. 99.9% = ~8.76h downtime/year; 99.99% = ~52min/year.
- SOC 2
- Security audit report showing a SaaS vendor meets standards for security, availability, and confidentiality. Type II is the gold standard.
- SSO
- Single Sign-On — login via identity provider like Okta, Google, or Microsoft Entra. Usually locked to enterprise tiers.
- SSO tax
- Premium pricing vendors charge to unlock SSO, even though SSO is a security requirement. Widely criticised.
- Seat minimum
- Contractually required minimum user count, regardless of actual usage. Common at mid-market and enterprise tiers.
- Seat-based pricing
- Price scales with active user count. Most common B2B SaaS model. Watch for hidden seat minimums.
- TAM
- Total Addressable Market — maximum revenue opportunity if 100% of potential customers bought.
- TCO
- Total Cost of Ownership — full cost including subscription, implementation, training, integration, and switching costs.
- Usage-based pricing
- Pricing based on consumption (API calls, events, data) rather than seats. Popular for infra SaaS like Twilio and Snowflake.
- Vendor lock-in
- Difficulty switching vendors due to data formats, integrations, or contractual penalties.
- Viral coefficient
- Users invited by existing users / active users. Greater than 1 means organic growth, less than 1 means needs paid acquisition.
- Webhook
- HTTP callback fired on an event. Integration plumbing for SaaS-to-SaaS communication.
- White-label
- Reselling SaaS under your own brand. Common for agencies and platforms that embed third-party tools.
- Zero Trust
- Security model assuming no network boundary is trustworthy. Verifies every access request regardless of origin.
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