# Financial Model Definitions

## Model Documentation

## Financial Model Definitions

See below for a list of definitions of terms used in the FlowCog financial model.

### Marketing Qualified Lead (MQL)

A lead who has intentionally engaged with your brand by performing actions like voluntarily submitting contact info for a newsletter, downloading trial software or a free ebook, or using software demos.

### Sales Qualified Lead (SQL)

An MQL becomes an SQL when the sales team confirms the lead has enough interest and is a fit for a discovery call to initiate a sales conversation.

### Opportunity / Open Opportunity / Opps

An SQL becomes an Open Opportunity when they confirm your company could provide a viable solution to their problem and decide to continue the sales process by exploring your products and services in greater detail.

### Opportunities sourced from Marketing

Purely generated by marketing activities, e.g. paid/organic traffic. Mutually exclusive from Opportunities sourced from Outbound Sales.

### Opportunities sourced from Outbound Sales

Cold calls/emails and networking. Mutually exclusive from Opps sourced from marketing.

### Sales Development Representative (SDR)

SDRs are responsible for outbound prospecting. They research and reach out to prospective clients who might be interested in the products your company sells, and introduce those clients to the company. They generate Open Opps.

### Account Executive (AE)

A salesperson responsible for closing sales deals to create new customers.

### Funnel

MQL -> SQL -> Open Opp -> Closed Won Opp -> Setup Phase -> Live/Fully Onboarded

### Non-conversion

Signed Customers that didn’t become Fully Onboarded

### Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR)

Revenue that repeats each month from SaaS product as well as ongoing professional services.

### Net Renewal Rate (NRR)

A = Client ARR $ from 12 months prior  
B = Current ARR $ of clients from only that same cohort  
NRR = B/A  
NRR can be above 100% due to upsells.

### Logo Retention Rate

Same as NRR, but instead of $ it’s client count. By definition, this maxes out at 100%.

### Dollar Churn

An annual churn rate: (1 – NRR)

### Logo Churn

An annual churn rate: (1 – Logo Retention Rate)

### Lifetime Value of a Customer (LTV)

For an average customer, the total expected gross profit (ARR – cost of revenue) to be recognized over the course of the customer’s lifetime.  
Expected Lifetime is calculated in years as: 1 / Logo Churn.
  
The formula is:

ARR * Gross margin / Expected Lifetime

### Customer Acquisition Cost (CAC)

In a given period:

(Sales and marketing – salaries and overhead for Account Management) / # of closed won opportunities

### A/R

Accounts Receivable

### T&E

Travel and Entertainment expense