Measuring Bookings, MRR, Revenue and Cash for Your SaaS Startup

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tomtunguz.comMeasuring Bookings, MRR, Revenue and Cash for Your SaaS Startup

Yesterday, I met with a bright, young SaaS entrepreneur who asked me to clarify four key numbers for SaaS companies: bookings, monthly recurring revenue, recognized revenue and cash collections. These four numbers are critical to understanding the health of a SaaS startup, and they can be quite different, so it’s important to have a strong grasp on the distinctions between them.

Let’s consider a hypothetical SaaS startup called RedRocket, which sells software for $12k per year, and asks its customers to pay each quarter. On the 15th day of January, one customer agrees to pay RedRocket $12k for a one year contract. The startup doesn’t sell any more software for the next twelve months. The table above demonstrates the differences in bookings, MRR, revenue and cash.

 

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