🎙️ Hey there, SaaSpreneurs!🎙️

👋 Ben Murray here, welcoming you to this edition of our SaaS Metrics School newsletter. Today, we're diving into a topic that often puzzles even the most seasoned financial strategists in our industry: 🤔 How to effectively track and report revenue when customer usage exceeds their subscription tiers. 📈💼

Don’t forget to join me live TODAY at 10am MT for a CAC class + templates. Save your seat here.

Whether you’re refining your own reporting methods or simply curious about best practices in revenue management, this newsletter will equip you with essential insights to handle excess usage without skewing your critical business metrics. 🛠️📉

You can also listen to this episode here.

📓Key Concepts to Learn💡

1. Variable and Usage-Based Revenue 📉 - This refers to revenue that varies based on the customer's level of usage or consumption of a service, contrasted with fixed subscription fees.

2. Tiered Pricing Model 🏷️ - A pricing strategy where a company charges different prices based not solely on subscription but also on usage levels. This model can help align pricing more closely with customer value. With a tiered model, it’s unlikely that customer revenue can go to $0! A hard lesson learned during the global pandemic.

3. Recording Excess Usage 📝 - The practice of keeping detailed records for transactions that exceed the tiered limits. Using unique product IDs or SKUs for excess usage helps to separate excess or overages from traditional subscription revenue in accounting. Don’t comingle these!

4. Revenue Segregation in Financial Statements 📘 - Placing excess usage revenue in separate general ledger accounts provides clarity in financial reporting and ensures that various revenue streams are accurately reflected in a company’s financial statements.

5. Impact on SaaS Metrics 📊 - Excess usage affects key metrics like Monthly Recurring Revenue (MRR) and Net Revenue Retention (NRR). By segregating revenues, companies can gain true insights into customer behavior and financial performance, affecting how retention metrics are calculated.

6. Flexible Reporting in Profit and Loss Statements 💹 - Allows companies to adjust how revenues are reported and analyzed, offering insights into the economic impact of different revenue streams.

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If you found this episode helpful, make sure to tune in to future episodes of SaaS Metric School to broaden your knowledge of essential SaaS metrics and finance topics.

Got any burning questions or specific metrics you'd like us to cover?

Drop us a line, and we'll do our best to address them in upcoming episodes.

Until next time, keep hustling and measuring those metrics!

Best regards,
Ben Murray
Host of SaaS Metric School

P.S. Don't forget to subscribe to our podcast and share it with your SaaS business buddies. Together, let's conquer the world of SaaS metrics!

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