Glossary

Showing 29 of 29 terms.

Annual Recurring RevenueARR

Annual Recurring Revenue is the annualized value of a company’s recurring subscription revenue at a point in time. It is the base against which retention, expansion, and churn are all measured. See Metric Definitions.

Average Revenue Per AccountARPA

Average Revenue Per Account is the average recurring revenue a company earns per customer account, calculated as ARR divided by the number of accounts. See Metric Definitions.

CAC Payback Period

CAC Payback Period is the number of months of gross profit it takes to recover the cost of acquiring a customer, calculated as that cost divided by monthly gross profit. The report reports 24 months on a blended basis and 37 months for new logos only. Note that "fully-loaded" elsewhere in the report refers to all-in acquisition cost, a different sense from this blended payback. See The CAC Trap.Also called: CAC Payback, payback period.

Certified Catalog

The certified catalog is the verified dataset behind the report. Every figure is read twice from the source survey PDFs and pinned to a single edition before it is accepted. See Methodology.

Churn Tax

The churn tax is the share of a company’s sales and marketing spend consumed replacing revenue lost to churn and downsell rather than funding growth. It is the Gross Magic Number minus the Net Magic Number: a 0.73 gross reading against a 0.50 net reading leaves 0.23, so 22 to 24% of sales and marketing spend replaces churned revenue rather than funding growth. See The Churn Tax.

Contraction

Contraction is recurring revenue lost from customers who reduce their spend without leaving, the standard-metric name for what this report calls downsell. It is subtracted in gross dollar retention alongside full churn. See Downsell, the Unreported Loss.Also called: Contraction MRR.

Customer Acquisition CostCAC

Customer Acquisition Cost is the sales and marketing cost to win one new customer. The report distinguishes the reported, S&M-only figure from the all-in, fully-loaded cost of acquisition. See The CAC Trap.

Downsell

Downsell is revenue lost from customers who stay but spend less, through reduced seats, downgrades, or renegotiated terms. It accounts for about 32 percent of all revenue loss in 2024, yet it is netted into GDR and NDR rather than reported on its own line. See Downsell, the Unreported Loss.Also called: Contraction, Contraction MRR.

EBITDA

EBITDA is earnings before interest, taxes, depreciation, and amortization, a common proxy for operating profitability. EBITDA margin expresses it as a share of revenue; in the report a 43-point cut to operating expense lifted the median EBITDA margin by 48 points while no retention metric moved. See Operating Expenses and Cost Cuts.

Edition

An edition is one annual release of the KBCM and Sapphire survey. Each edition reports on the prior fiscal year, so the 2025 edition covers FY2024. See Data Integrity & Corrections Log.

Expansion

Expansion is additional recurring revenue from existing customers through upsell, cross-sell, or seat growth. It exceeds half of new ARR only among companies above 25 million dollars in ARR. See The Expansion Myth.

Expansion-to-Churn Coverage

Expansion-to-Churn Coverage is the ratio of expansion ARR to lost ARR (churn plus downsell). It measures how far growth from existing customers covers what they take away, and it fell from 1.6× to 1.07× between 2021 and 2024. See The NDR Crisis.

Feeder metric

A feeder metric is a measurable input that feeds an output line on the standard SaaS scorecard: the output is what the board sees, the feeders are what moved it. GDR’s feeders are gross churn, downsell, logo churn, contract-length mix, and services attach; NDR adds expansion rate and its coverage of churn. An output can hold still while its feeders move in opposite directions, which is why this report reads the feeders rather than the headlines. See Metric Definitions.

Fully-Loaded CAC

Fully-Loaded CAC is the all-in cost of acquiring a customer once R&D, onboarding, customer success, and overhead are added to sales and marketing, which runs about 2.8× the reported, S&M-only CAC. The KBCM survey uses the same phrase for a different measure, an S&M-per-new-ARR efficiency ratio; this report means the all-in cost. See Metric Definitions.Also called: fully loaded CAC, all-in CAC, fully-burdened CAC.

Gross Churn

Gross churn is the share of recurring revenue lost from existing customers before any expansion, through both full cancellations and downsell. Per the KBCM survey it is the complement of gross dollar retention, where GDR equals Beginning ARR minus Churned ARR minus Downsell ARR, over Beginning ARR, and it has not improved across four consecutive surveys, standing at 14 to 15 percent on the current edition. Within that loss the report separates lost logos from downsell, which is about 32 percent of it in 2024. See The Churn Tax.Also called: Gross Dollar Churn, gross revenue churn.

Gross Dollar RetentionGDR

Gross Dollar Retention is the share of recurring revenue retained from existing customers before any expansion, so it captures churn and downsell but not upsell. It cannot exceed 100 percent. See Metric Definitions.Also called: Gross Revenue Retention, GRR.

Gross Magic Number

The Gross Magic Number is a measure of gross sales efficiency: new-logo plus upsell ARR, that is gross new ARR before churn is subtracted, divided by sales and marketing expense. See Metric Definitions.Also called: Magic Number.

Logo Churn

Logo churn is the share of customers who leave in a period, counted by number of accounts rather than by revenue.Also called: customer churn, logo retention.

Multi-Year Contract

A multi-year contract is a subscription term longer than one year. Multi-year terms are associated with roughly 79 percent lower annual churn, yet adoption fell from 48 to 26 percent in a single survey year. See Contracts, the Abandoned Lever.

Net Dollar RetentionNDR

Net Dollar Retention is the share of recurring revenue retained from existing customers including expansion, so upsell can carry it above 100 percent. Median NDR fell from a 2021 peak of 109 percent to 101 percent in 2024. See The NDR Crisis.Also called: Net Revenue Retention, NRR, net retention.

Net Magic Number

The Net Magic Number is a measure of net sales efficiency: net new ARR, new logo plus upsell and net of churned ARR, divided by sales and marketing expense. It has held at roughly 0.50, so each dollar of sales and marketing returns about fifty cents of net new ARR. See The Churn Tax.Also called: Magic Number, SaaS Magic Number.

Net New ARR

Net new ARR is the recurring revenue a company adds over a period net of what it loses: new-logo ARR plus upsell, minus churned ARR. It is the numerator behind the Magic Numbers and the basis for measuring how efficiently growth is bought. See Metric Definitions.

Operating Expense Ratio

The operating expense ratio is operating expense as a share of revenue. A 43-point cut lifted EBITDA by 48 points while moving no retention metric. See Operating Expenses and Cost Cuts.

Restatement

A restatement is a revision of a previously published figure in a later survey edition. Across 39 cross-edition restatements, 79 percent moved the past in a worse direction. See Data Integrity & Corrections Log.

Rule of 40

The Rule of 40 is the test that a company’s revenue growth rate plus its profit margin, measured as EBITDA margin in this report, should reach at least 40. The share of companies clearing it fell from 11 to 5 percent. See Operating Expenses and Cost Cuts.

Seat-Based Pricing

Seat-based pricing is pricing charged per user seat. Its prevalence has held near 40 percent across survey editions even as AI began to reduce the number of seats a company needs. See AI and Seat-Pricing Exposure.Also called: per-seat pricing, per-user pricing.

Upsell

Upsell is additional recurring revenue from selling existing customers more of, or a higher tier of, what they already buy. It is the gain-side counterpart to downsell and the main driver that lifts net dollar retention above gross.

Vintage

A vintage is a single survey edition treated as a self-contained source, the no-splice boundary of the report’s method. Every number is pinned to one named edition and never mixed across editions. See Methodology.

Zero Interest-Rate PolicyZIRP

Zero Interest-Rate Policy, or ZIRP, is the era of near-zero benchmark interest rates from roughly 2020 to 2022, when cheap capital pushed SaaS valuations and growth expectations to record highs. The report treats the 2021 net dollar retention peak of 109 percent as a ZIRP-era anomaly and the 101 percent of 2024 as reversion toward the pre-ZIRP norm. See The NDR Crisis.