My colleague Ed made a cheat sheet for SaaS metrics [pdf] <a href="https://chartmogul.attach.io/NkqgtF8H" rel="nofollow">https://chartmogul.attach.io/NkqgtF8H</a>
> "How and when revenue is recognized is governed by GAAP."<p>Being a CPA & coder this statement really annoys me, GAAP for those that don't know simply means "Generally agreed Accounting principals" and there is really no acceptable reason for this acronymn to be used outside of the (accounting) profession. Maybe it wasn't the authors intent but it smacks of those people who use jargon to help aggrandize their position when a simple inclusive explanation would have been more appropriate.
As an engineer turned PM who might start a company some day, I've always seen financial literacy as one of my weaknesses. Companies are ultimately judged for their finances. Ignoring this subject is dangerous for a company's prospects, and illegal if it causes you to make misleading statements to investors.<p>If anybody is looking for further reading on this subject, I enjoyed "Financial Statements" earlier this year(<a href="http://www.amazon.com/Financial-Statements-Step---Step-Understanding/dp/1601630239" rel="nofollow">http://www.amazon.com/Financial-Statements-Step---Step-Under...</a>). Quick and straightforward, it starts with the vocabulary and explains the major financial statements (Income, Cash Flow, Balance). The majority of the book follows a company from inception to dividend disbursement, explaining how various business activities (e.g. signing a lease) hit the financial statements.
I really like the fact that this post first distinguishes "#1 Bookings vs. Revenue".<p>I hear it almost everyday among startups, where they talk about bookings, revenue and incoming payments interchangeably. And sometimes even in the same sentence such as
"We made 100 k in the whole last year [meaning revenue], we currently make about 50 k per month [meaning bookings] and just last week we made another 30 k [meaning incoming payment]."<p>This makes it way to hard to properly communicate with founders. So great stuff this post.
Does anyone have an estimate on the average burn rate for a startup in San Francisco? Seems important these days, given talk of the end of easy money (see @bgurley)
I believe one of the tricker question is whether your revenue is truly recurring.<p>E.g. you may say consulting services or just charge monthly support subscription.<p>Especially in short term it is easy to convince yourself that it is recurring (e.g. monthly access to tutorials) when really churn is so high, since people use it on-need basis rather than long-term.
Two questions:<p>How do you deal with refunds? Let's say a customer buys a product, for whatever reason their expectation not met, and a refund is issued. Do you adjust revenue in the month the revenue was recognized? Or do you add negative revenue to the month in which the revenue was received? Or something else?<p>And for average monthly growth rate, that can vary a lot for the same company depending on where you start. If a company has monthly revenues of 1, 6, 10, 12, 14, 15, 16, it has an average growth rate of 58% over the past 6 months, but 10% over the past three months (and 7% over the past month). I see startups using arbitrary start dates to inflate average growth rates, and am wondering if there's something standard when presenting this metric.
While great, this seems like not-so-easy work. Perhaps this is an opportunity for a company to charge a couple of hundred dollars monthly and create semi-automated reports for your investors.
Regarding ...<p>> #5 LTV (Life Time Value)<p>Shouldn't the calculation factor in the time value of the money over the estimated life time?<p><a href="https://en.wikipedia.org/wiki/Time_value_of_money" rel="nofollow">https://en.wikipedia.org/wiki/Time_value_of_money</a>
Since there's so much accounting in these metrics, anybody has a recommendation for good accounting software, or knowledgebase? Especially for hardware startups (e.g. building physical stuff, inventory, keeping track of component and parts)...