ARR means three things in the same company
Sales, finance and the board each use a version, none of them written down, and the differences only surface when an outsider reconciles them.
Software
Recurring revenue defined once, and reported the same way twice
Billing, product and finance data reconciled, so ARR, churn and cost to serve are the same numbers in a board pack and in a diligence process.
Almost every software business we see has more than one definition of recurring revenue, and discovers this during a fundraise or a sale. Billing holds contracts, the product holds usage, and the ledger holds recognised revenue, on three different bases. We agree the definitions, write them down and build the reporting on top, so ARR, net revenue retention and cost to serve survive somebody else checking them.
Discuss your operationWhat we usually find
The problems that come up in almost every one of these businesses.
Retention is reported without cohorts
A single churn percentage hides which cohorts, plans and segments are actually leaving, which is the only version that suggests what to do.
Cost to serve is invisible
Infrastructure, support and success costs are pooled at company level, so gross margin by plan or customer size is guesswork.
Where we start
What the first engagement usually covers.
Scope depends on the state of your systems. These are the pieces that recur in this sector.
Agreed revenue definitions
ARR, bookings and recognised revenue defined once, written down, and reconciled to the ledger so the three can be moved between.
Cohort retention
Gross and net revenue retention by cohort, plan and segment, including the expansion that offsets churn.
Cost to serve
Infrastructure, support and success cost attributed to plan and customer size, so gross margin is measured rather than assumed.
Diligence-ready reporting
The reporting an acquirer or investor will ask for, built now rather than reconstructed under time pressure later.
What changes
What is different afterwards.
You own all of it: the code, the written definitions and documentation aimed at whoever maintains this after us.
- A written definition of ARR that reconciles to the ledger
- Net revenue retention by cohort and segment
- Gross margin by plan and customer size
- Reporting that survives outside scrutiny
The builds behind it
Sector knowledge decides the order. The builds are the same four.
Single source of truth
Your finance, customer and operational records joined into one dataset, with each figure defined once and traceable back to the system it came from.
Analytics layer
Reporting built on top of the joined data, aimed at the few revenue and cost drivers that actually change the result.
Workflows
One defined task, automated inside a process that already exists, measured against whatever it replaced.
Financial modelling
Driver-based models built on the same definitions as your reporting, so the forecast and the actuals stop disagreeing.
Worth asking
Questions this tends to answer.
- What is our ARR, on a definition that holds up?
- Which cohorts retain and which quietly leave?
- What does it cost to serve each plan?
- What will diligence find that we have not?