SaaS Talk™ with the Metrics Brothers - Strategies, Insights, & Metrics for B2B SaaS Executive Leaders CARR, ARR, and the Impact of Usage-Based Pricing
Sep 25, 2024
Dive into the complexities of Contracted Annual Recurring Revenue (CARR) and Annual Recurring Revenue (ARR) as the hosts dissect their definitions and calculations. Discover how Usage-Based Pricing is reshaping revenue reporting in the SaaS industry. The conversation highlights the challenges of categorizing variable revenue, the transition from fixed licenses to more flexible pricing models, and the importance of implied ARR. Gain insights into revenue recognition practices and the evolving metrics crucial for navigating subscription-based businesses.
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The Rise of Usage-Based Pricing
- Usage-based pricing models are becoming increasingly popular, leading to less predictable revenue.
- This shift requires businesses to adapt their forecasting and revenue recognition strategies.
Track Revenue Components Internally
- Track contractual and variable revenue separately for internal analysis.
- Use this data to optimize pricing models and sales strategies for greater predictability.
The Martini Analogy
- Dave Kellogg uses the analogy of a man ordering a martini to illustrate recurring vs. reoccurring revenue.
- This example highlights how the nature of the purchase (regular vs. one-time) determines its classification.