🎙️ Hey there, SaaSpreneurs!🎙️

Welcome to another edition of SaaS Metrics School! 🎉 I'm Ben Murray, your host, and today we're diving into the importance of your MRR schedule and how it can impact your company's valuation. So let's get started and uncover some key concepts that will help you unleash the power of your recurring revenue.

In this episode, we explore what an MRR schedule is and how it can be a game-changer for your business. Picture a spreadsheet with customer names running down one column and months running along the top. 📊

This MRR schedule reveals revenue generated by each customer on a monthly basis, also known as the customer waterfall. Trust me, this data is essential to understand the health of your recurring revenue. 📓

You can also listen to the episode here.

📓Key Concepts to Learn💡

1. 📅 MRR Schedule: An MRR schedule, also known as the customer waterfall, is like a cool chart that shows you how much revenue you are producing each month from your customers. You whip it up using invoice data and it's your trusty sidekick for checking the pulse of your recurring revenue. 💰📊

2. 🖥️ Creating an MRR Schedule: You can put together your MRR schedule in a bunch of ways, like using Excel templates, subscription management tools, or important revenue recognition (rev rec) engines. But here's the deal: you've got to make sure it's accurate, 'cause it's the key to understanding the stickiness of your recurring revenue. 💡👩‍💻

3. 💰 Importance for Valuation: When you're trying to woo investors, having a well-crafted MRR schedule is like wearing your best suit to the big meeting. Investors peek at it to figure out stuff like how much revenue you're keeping, how many customers stick around, and all that good stuff. It's like the magic crystal ball for valuing your company. 🔮💸

4. 🤯 Rev Rec Challenges: Revenue recognition can be a real head-scratcher for your MRR schedule. Things like credit notes, timing snafus, catch-ups, and adjustments from the past can throw a wrench in the gears. And that can throw off potential investors. 😬💼

5. 📊 Operational and Due Diligence Importance: Your MRR schedule isn't just for impressing investors. It's also your secret weapon for checking the health of your business operations. It's like your financial stethoscope for due diligence. It tells you how sticky your revenue really is. 💉📈

6. 💔 Retention Calculation: Without an MRR schedule and some retention math, figuring out your company's value can be like trying to navigate a maze blindfolded. Some big-money folks might not want to play ball if they can't see your retention rates on that MRR schedule or if those numbers drop below a certain point. 💰🚫

So, by getting cozy with these MRR schedule tricks and understanding why they're a big deal, SaaS companies can boost their worth, turn investors' heads, and get a grip on their revenue. 💪💰🚀

If you're still in the early stages or pre-revenue, I get it - your MRR schedule might not hold much meaning just yet. But as your company grows, it becomes a pivotal factor in determining your valuation. Some PE firms even consider it a deal-breaker if they can't calculate your retention from your MRR schedule. It's that important!

So, if you want to gain an edge in operations, impress potential investors, and harness the power of your metrics, start prioritizing your MRR schedule today. Just remember, it's not just a spreadsheet or a bunch of numbers. It's a powerful tool that directly impacts your company's growth and success.

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

📝 Episode Recap 🎧

In this episode of SaaS Metrics School, host Ben Murray highlights the significance of an MRR (Monthly Recurring Revenue) schedule and its impact on the valuation of a company. Ben explains that an MRR schedule is essentially a customer waterfall, showing revenue by month by customer. He emphasizes that the MRR schedule is crucial for evaluating the health of recurring revenue.

Ben delves into the process of creating an MRR schedule, which involves utilizing invoice data such as customer name, start and end dates, and MRR. He suggests using Excel templates, subscription management tools, or a rev rec engine for this purpose. However, he warns that rev rec can sometimes cause complications, such as credit notes, timing issues, and catch-ups, which can disrupt revenue retention and potentially cost millions in valuation.

Ben asserts that for companies at an early revenue stage or pre-revenue, an MRR schedule might not hold much significance. However, as a company grows, it becomes a top request during due diligence. Prospective investors will calculate their own retention numbers based on the MRR schedule to assess the health and stickiness of the recurring revenue. Ben emphasizes that without retention calculations and an MRR schedule, it becomes challenging to determine a company's valuation. He shares that some private equity firms consider the absence of retention calculations as a deal breaker, while others have specific retention thresholds below which they won't invest.

In conclusion, Ben underscores the importance of the MRR schedule not only for operational purposes but also for due diligence and the metrics derived from it.