Bookman Capital

Valuation Terms Explained – SaaS, AI, Software, and Industry Essentials for Buying and Selling

This comprehensive alphabetical definition list includes essential terms, acronyms, and specialized terminology drawn from Bookman Capital’s blog articles and expanded with industry-standard concepts from SaaS, AI, software, M&A, and general business valuation.

  1. AI: Artificial Intelligence – Computer systems that can perform tasks typically requiring human intelligence
  2. AI ROI: Artificial Intelligence Return on Investment – A metric measuring the financial return from AI investments
  3. API: Application Programming Interface – A Set of protocols allowing different software applications to communicate
  4. ARPU: Average Revenue Per User – The average revenue generated per user or customer
  5. ARR: Annual Recurring Revenue – The value of recurring revenue normalized to a one-year period
  6. ARR Multiple: Annual Recurring Revenue Multiple – Company valuation divided by ARR, used to compare valuations
  7. ASP: Average Selling Price – The average price at which a product or service is sold
  8. B2B: Business-to-Business – Companies that sell products or services to other businesses
  9. B2B2C: Business-to-Business-to-Consumer – Business model where companies sell through other businesses to reach consumers
  10. B2C: Business-to-Consumer – Companies that sell directly to individual consumers
  11. Benchmarking: Process of comparing business metrics against industry standards or competitors
  12. Bootstrapped: A company that grows using internal revenue without external funding or investment
  13. Burn Multiple: is a broad capital efficiency metric that shows how much revenue your company generates for every dollar it burns.
  14. Burn Rate: Rate at which a company spends cash reserves, typically measured monthly
  15. Business Intelligence: Technologies and strategies for analyzing business information and data
  16. CAC: Customer Acquisition Cost – The cost of acquiring a new customer
  17. CAC Payback: Customer Acquisition Cost Payback Period – Time required to recover customer acquisition costs
  18. CAGR: Compound Annual Growth Rate – The rate of return required for an investment to grow
  19. Cap Table: Capitalization Table – A Document showing equity ownership in a company
  20. Cash Flow: Net amount of cash moving into and out of a business
  21. Channel Partner: A third-party company that helps sell or distribute products or services
  22. Churn Rate: The percentage of customers who stop using a product or service during a given time period
  23. CLV: Customer Lifetime Value – Another term for LTV, the total revenue expected from a customer
  24. CMS: Content Management System – Software for creating and managing digital content
  25. Cohort Analysis: A Method of analyzing customer behavior by grouping users who share common characteristics
  26. Contracted ARR: Annual Recurring Revenue secured through signed contracts, providing revenue predictability
  27. Conversion Rate: Percentage of users who complete a desired action, such as making a purchase
  28. CPA: Cost Per Acquisition – Marketing metric measuring the cost to acquire a customer
  29. CRM: Customer Relationship Management – Technology for managing customer interactions and data
  30. Cross-Selling: The Practice of selling additional products to existing customers
  31. Customer Success: Business methodology ensuring customers achieve desired outcomes while using your product
  32. Data Room: Secure repository of documents used during due diligence processes
  33. DCF: Discounted Cash Flow – A valuation method using projected cash flows discounted to present value
  34. Due Diligence: An Investigation process conducted before making investment or acquisition decisions
  35. EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization – A measure of operational profitability
  36. EBITDA Multiple: Company valuation divided by EBITDA, used for valuation comparison
  37. Enterprise: Large business customers, typically with complex needs and higher contract values
  38. Equity-Backed: Companies funded by external investors in exchange for ownership stakes
  39. ERP: Enterprise Resource Planning – Integrated management of main business processes
  40. EV: Enterprise Value – Total value of a company, including debt and excluding cash
  41. EV/Revenue: Enterprise Value to Revenue ratio – Valuation multiple comparing enterprise value to revenue
  42. Expansion Revenue: Additional revenue from existing customers through upsells, cross-sells, or usage increases
  43. Freemium: Business model offering basic services for free while charging for premium features
  44. Go-to-Market: Strategy for bringing a product to market and reaching target customers
  45. Gross Margin: Revenue minus cost of goods sold, expressed as a percentage of revenue
  46. GRR: Gross Revenue Retention – Percentage of recurring revenue retained from existing customers
  47. ICP: Ideal Customer Profile – Description of the perfect customer for a product or service
  48. IPO: Initial Public Offering – When a private company first sells shares to the public
  49. KPI: Key Performance Indicator – Metrics used to evaluate the success of an organization or activity
  50. Land and Expand: Sales strategy of starting with small deals and growing accounts over time
  51. Lead Generation: Process of attracting and converting prospects into potential customers
  52. LOI: Letter of Intent – Document outlining preliminary agreement between parties in a transaction
  53. LTV: Lifetime Value – The total revenue expected from a customer over their entire relationship
  54. LTV/CAC: Lifetime Value to Customer Acquisition Cost ratio – Measures customer profitability
  55. M&A: Mergers and Acquisitions – Consolidation of companies through various financial transactions
  56. MAU: Monthly Active Users – Number of unique users who engage with a product in a month
  57. ML: Machine Learning – A Type of AI that enables computers to learn without explicit programming
  58. MQL: Marketing Qualified Lead – Prospect deemed likely to become a customer based on marketing criteria
  59. MRR: Monthly Recurring Revenue – Predictable monthly revenue from subscriptions
  60. MVP: Minimum Viable Product – Product with just enough features to satisfy early customers
  61. NDA: Non-Disclosure Agreement – Legal contract maintaining confidentiality of information
  62. NDR: Net Dollar Retention– This metric shows how much money a company makes from its existing customers after accounting for upgrades, extra purchases, and cancellations.
  63. Net Retention: Percentage of revenue retained from existing customers, including expansion and churn
  64. NLP: Natural Language Processing – AI technology for understanding and processing human language
  65. NPS: Net Promoter Score – Customer satisfaction metric measuring likelihood to recommend
  66. NRR: Net Revenue Retention – Measures revenue growth from existing customers, including expansion and churn
  67. Onboarding: Process of integrating new customers or users with a product or service
  68. Operational Metrics: Key performance indicators that measure day-to-day business operations
  69. PE: Private Equity – Investment firms that buy and improve companies using debt and equity
  70. Pipeline: Collection of potential deals or customers at various stages of the sales process
  71. PLG: Product-Led Growth – Business model where product usage drives customer acquisition and expansion
  72. PMF: Product-Market Fit – Degree to which a product satisfies strong market demand
  73. Product Analytics: The Process of analyzing how users interact with a product to improve it
  74. QBR: Quarterly Business Review – Regular meeting to assess business performance and strategy
  75. Recurring Revenue: Revenue that is predictable and expected to continue in the future
  76. Retention Rate: Percentage of customers who continue using a product over a specific period
  77. ROI: Return on Investment – Performance measure evaluating the efficiency of an investment
  78. Rule of 40: Growth rate percentage plus profit margin percentage should equal or exceed 40%
  79. SaaS: Software as a Service – Cloud-based software delivery model with subscription pricing
  80. Sales Cycle: Length of time from initial customer contact to closing a deal
  81. Scalability: The Ability of a system to handle increased workload or expand capacity
  82. SCI: SaaS Capital Index – Index tracking median public SaaS company ARR multiples
  83. SDE: Seller’s Discretionary Earnings – Cash flow metric used in small business valuations
  84. Self-Service: A Business model that allows customers to complete transactions without human assistance
  85. SMB: Small and Medium Business – Companies with limited employees and revenue
  86. SQL: Sales Qualified Lead – Prospect vetted by the sales team as ready for direct sales engagement
  87. Stickiness: Measure of how likely customers are to continue using a product
  88. Subscription Model: A Business model where customers pay recurring fees for continued access
  89. TAM: Total Addressable Market – Total market demand for a product or service
  90. Time to Value: Duration between customer purchase and when they first realize value from the product
  91. Trial Conversion: Percentage of trial users who become paying customers
  92. Unit Economics: Revenue and costs associated with a single unit of business
  93. Upselling: The Practice of encouraging customers to purchase higher-value products or services
  94. User Experience: Overall experience of a person using a product, especially in terms of ease of use
  95. Valuation: Process of determining the current value of a company or asset
  96. VC: Venture Capital – Financing provided to startups and small businesses with growth potential
  97. Vertical Integration: A Strategy where a company controls multiple stages of production or distribution
  98. Vertical SaaS: Software solutions designed for specific industries or business verticals
  99. Viral Coefficient: Measure of how many new users each existing user brings to a product
  100. WACC: Weighted Average Cost of Capital – The Rate the company pays to finance assets
  101. Working Capital: Short-term assets minus short-term liabilities, measuring operational liquidity
  102. Year-over-Year: Comparison of financial or operational metrics from one year to the previous year
  103. YoY Growth: Year-over-Year Growth – Percentage increase in metrics compared to the same period in the previous year