The impact of $2k of new recurring revenue on a SAAS business

http://blog.aparicio.org/2013/02/08/recurring-revenue-impact-for-saas/

by samaparicio • 13 years ago

2 1 13 years ago

blog.aparicio.org

csense• 13 years ago

From the article:

> Every extra $1,000 in Monthly Recurring Revenue (MRR) contributes $78k to the annualized revenue number. This is basic math

"Basic math" tells me that $1k in monthly revenue is $12k in annual revenue [1].

I ran some numbers and figured out that he's actually talking about $1k of monthly revenue growth per month. I.e. if your plan costs $10/month and you get 100 new customers per month, then at the end of the year, you'll be making $78k / year more than you would have if you didn't have any new customers.

This is, indeed, basic math. (In particular the sum of an arithmetic series [2]; he comes up with 78 because it's the 12th triangular number [3] [4].)

[1] Plus a little bit if you're putting the money in an interest bearing account, but interest rates are very low right now.

[2] http://en.wikipedia.org/wiki/Arithmetic_progression#Sum

[3] http://en.wikipedia.org/wiki/Triangular_number

[4] http://oeis.org/A000217

The impact of $2k of new recurring revenue on a SAAS business

Related Stories