Startup finance, defined
One sentence per term, the formula, and a worked example with real figures. Written for founders, so every definition says what the number is for, not only what it means.
ARR
ARR is the annualised value of a company's recurring revenue, calculated as monthly recurring revenue multiplied by twelve.
Break-even point
The break-even point is the sales volume at which total contribution margin exactly covers fixed costs, so the business makes neither profit nor loss.
Burn multiple
Burn multiple is the amount of cash a company burns to add one unit of new annual recurring revenue, and it measures capital efficiency in a single ratio.
Burn rate
Burn rate is the pace at which a company spends its cash reserves, usually expressed as a monthly figure.
CAC
CAC is the average cost of acquiring one new customer, including all sales and marketing spend for the period.
CAC payback period
CAC payback period is the number of months of gross profit needed to recover what was spent acquiring a customer.
Churn rate
Churn rate is the percentage of customers or revenue lost over a period, usually measured monthly.
Contribution margin
Contribution margin is the money each sale leaves after its own variable costs, and it is what pays for fixed costs.
Customer lifetime value
Customer lifetime value is the total gross profit a business expects from one customer across the whole relationship.
Default alive
A startup is default alive if its current growth and spending would carry it to profitability on the cash it already has, without raising again.
Expansion revenue
Expansion revenue is additional recurring revenue from existing customers through upgrades, added seats or usage growth.
Fixed costs
Fixed costs are expenses that stay the same regardless of how much a business sells, such as rent, salaries and software subscriptions.
Gross burn
Gross burn is the total cash a company spends in a period, before counting any revenue.
Gross margin
Gross margin is the percentage of revenue left after the direct costs of delivering the product.
LTV:CAC ratio
The LTV:CAC ratio compares the lifetime gross profit of a customer with the cost of acquiring them.
Margin of safety
Margin of safety is how far sales can fall before a business reaches its break-even point, expressed as a percentage of current volume.
MRR
MRR is the predictable revenue a subscription business earns each month from active subscriptions, excluding one-off fees.
Net burn
Net burn is total cash out minus total cash in over a period, and it is the figure that determines runway.
Net revenue retention
Net revenue retention is the percentage of recurring revenue retained from existing customers over a period, after expansion, contraction and churn.
Path to profitability
A path to profitability is the specific sequence of revenue growth and cost changes that would carry a company from losing money to covering its own costs.
Revenue concentration
Revenue concentration is the share of total revenue coming from a single customer, and it measures how exposed a business is to losing one account.
Runway
Runway is the number of months a company can keep operating before it runs out of cash, at its current rate of spending.
Unit economics
Unit economics are the revenues and costs of a business measured per single unit, usually one customer, to show whether the model works before scale.
Variable costs
Variable costs are expenses that rise and fall with each unit sold, such as hosting per customer, payment fees and materials.
These numbers are easier live than defined
Plainhub computes all of them from money you record in plain words. Type what you spend, and runway, burn, MRR and team cost stay current. No bank logins, nothing to maintain.