Building an app? Download our pricing report!   Download

ARR can be the wrong metric to focus and it can provide a false sense of progress — a vanity metric.‌

10 months ago | From Note Worthy | Author: Villi Iltchev

Annual Recurring Revenue (ARR) is the most frequently used metric in SaaS. Even non-recurring revenue startups use ARR when they want to describe the size of their business (which makes little sense, but that is the topic of another post). ARR is a simple and beautiful metric because it is easy to understand and provides a clear sense of scale.
ARR is calculated by taking the latest month’s Monthly Recurring Revenue (MRR) and multiplying it times 12 to annualize it. ARR is a more relevant metric than GAAP revenue to describe the size of a SaaS business: revenue is, by definition, backwards facing and, in the case of SaaS, it does not even do a good job of describing the past because of the waterfall nature of how subscription revenue is recognized. ARR, on the other hand, describes the present. It is a metric at a point in time. Just like the cash on the balance sheet is a number tied to a date, ARR is a number that describes the current scale of the business.
Why ARR Growth is Misleading
The problem with ARR comes when you try to manage your business around ARR. It actually provides little insight into performance, growth, or execution. It is the wrong metric to focus the efforts of an on organization around and it can provide a false sense of progress — a vanity metric. Let me demonstrate with an example.
Assume in Year 1 a startup launches their product and grows to $2M in ARR. Great start! In Year 2, the startup finishes the year with $5M in ARR. Wow, 150% growth! In Year 3, the startup finishes the year with $9M in ARR. 80% growth in ARR!
I can hear the founder proudly stating how they grew 2.5x in Year 2 and continued rapid growth in Year 3, almost doubling the size of the business. But, I see a different story. I see a company that is growing fast, but not nearly as fast as the founder believes. I see a startup that grew its output by 50% in Year 2 and 33% in Year 3. Why? The output of a SaaS company is best measured by bookings. We can define bookings as: the annual contract value of NEW business (from new and existing customers). Ignoring churn to make the math easy, the bookings in the example above were $2M in Year 1 ($2M minus $0), $3M in Year 2 ($5M less $2M), and $4M in Year 3 ($9M less $5M). The bookings in each of these periods measures the NEW ARR (output) our startup was able to generate. This paints a very different picture of growth: 33% bookings growth as compared to 80% ARR growth in Year 3.

       

What your peers are reading!

When a company understands its users as well as purple does, it feels like they have earned our trust
When a company understands its users as well as purple does, it feels like they have earned our trust
Added 10 months ago | As appeared first on Prototypr | Author: Justin Ramedia

Not long ago, I was trying to watch a video on YouTube. I got the expected “5-second till skipping” countdown and had my mouse hovering over the skip link, but the video was interesting. I laughed, so I figured I’d give it another few seconds to see what the product was all about. I ended up watc...  ...Read more


Companies looking to build consumer habits should know that monetization is a result of engagement .
Companies looking to build consumer habits should know that monetization is a result of engagement .
Added 10 months ago | As appeared first on Medium | Author: Nir Eyal

According to the New York Times, when Page looks at a potential company to acquire, he wants to know if the product is, like a toothbrush, “something you will use once or twice a day.” Page clearly understands habits. As I wrote in my book, “Hooked: How to Build Habit-Forming Products,” frequent...  ...Read more


When a startup company is visualizing their product, they tend to forget the moments a user has to wait.
When a startup company is visualizing their product, they tend to forget the moments a user has to wait.
Added 10 months ago | As appeared first on Hackernoon | Author: Wayne Chang

Contrary to MVPs, where the goal is to get something barely usable out the door and into the market for initial feedback, an MLP takes the opposite approach, treating, among other things, the first-time experience of a new user very seriously. This is the first time they’ll see your product, the...  ...Read more


Working for free is OK in the early days, but later, it gives you an excuse to just “do your best”.
Working for free is OK in the early days, but later, it gives you an excuse to just “do your best”.
Added 10 months ago | As appeared first on Medium | Author: Jason M. Lemkin

What are the Top 10 things I’d tell myself to do better, if I could go back in time? My top list: Slow down big decisions — when you aren’t sure. You have to move fast and break things, but if the pit in your stomach says “maybe don’t do that” — slow that decision down. My biggest mistakes ha...  ...Read more


Launching is hard work, but if hyperlocal marketplaces works in one market, then it will work in hundreds more.
Launching is hard work, but if hyperlocal marketplaces works in one market, then it will work in hundreds more.
Added 10 months ago | As appeared first on andrewchen | Author: Andrew Chen

How to build a billion dollar digital marketplace – examples from Uber, eBay, Craigslist, and more Marketplaces are easily underestimated When marketplaces get big, they can get really big. Some of the biggest tech successes ever – eBay, Airbnb, Alibaba, Uber – are marketplaces worth ...  ...Read more


If you release your product too early, users may write it off as not good enough and getting them back may be difficult.
If you release your product too early, users may write it off as not good enough and getting them back may be difficult.
Added 10 months ago | As appeared first on cbinsights | Author: cbinsights

From lack of product-market fit to disharmony on the team, we break down the top 20 reasons for startup failure by analyzing 101 startup failure post-mortems. WHERE IS THIS DATA COMING FROM? Start your free trial today Email Email SIGN UP After we compiled our list of startup failure post-m...  ...Read more


Top Mobile App Development Companies

Concentric Sky Company Profile, Apps, Reviews   
Concentric Sky

We help our clients turn ideas into applications that make sense. Our comprehensive, in-house team will use the power of design and technology to bring your ideas to life. We specialize in mobile a...more

Employees: 50
Founded: 2005
Technologies:   Java    Python    Android    iOS    MySQL    HTML5    Postgres    MongoDB   
 Locations

Eugene, US

Stone Labs Company Profile, Apps, Reviews   
Stone Labs

At Stone Labs we apply our high-quality hi-tech knowledge to resolving functional problems of European, Australian and American (Atlantic coast) enterprises, by means of web/mobile/software solutio...more

Employees: 30
Founded: 2007
Technologies:   PHP    Android    iOS    MySQL    Ruby    Rails    AJAX    Angular.js   
GoVisual App Design & Development Company Profile, Apps, Reviews   
Go Visual App Design & Development

Apps must be user-friendly, perform well and look amazing. This is what we aim for when we design and build them. .more

Employees: 10
Founded: 2010
Technologies:   Android    iOS   
 Locations

Veenendaal, Netherlands

Mutual Mobile Company Profile, Apps, Reviews   
Mutual Mobile

We provide: expertise to help make the right decisions about where to invest in mobile, and the ability to execute flawlessly with award-winning design, engineering, and project management resources..more

Employees: 500
Founded: 2009
Technologies:   iOS   
 Locations

Austin, US

Are you sure, you can find a capable, trustworthy & affordable mobile app developer, all by yourself?

Looking to Build a Mobile App?

Here are some of the best apps built by developers from our network.
GreenVolts by RapidValue - App Development Company in Pleasanton, California, United States
  GreenVolts
by RapidValue
iOS   
 4125
        
JobBoss by Appmosphere - App Development Company in Minneapolis, Minnesota, United States
  JobBoss
by Appmosphere
iOS   
 7574
        
Flitsmeister by GoVisual App Design & Development - App Development Company in Veenendaal, Utrecht Province, Netherlands
  Flitsmeister
by GoVisual App Desi...
Android    iOS   
 5725
        
Brickstr by DevelopmentNow - App Development Company in Portland, Oregon, United States
  Brickstr
by DevelopmentNow
Android    iOS   
 4434
        
     
About •  Careers •  How it works for Developers •  FAQ •  Contact •  Blog •  RSS

© 2012 - 2017 ContractIQ   Terms of Service   Privacy Policy