Plain-English definitions for founders who skipped business school
Every term has a standard definition and a real one. Below are the real ones. Cross-linked to the frameworks that operationalize them.
ARR / MRR (Recurring Revenue)
Two views of the same thing: the predictable revenue your subscription business earns on repeat. MRR is the monthly figure, ARR is the annual roll-up. Pick the one your sales cycle uses.
Buyer Persona
A research-based archetype of a real buyer in a specific market segment, used to align product, pricing, and positioning decisions. Coined by Tony Zambito in 2002. Methodology formalized by Adele Revella in 'Buyer Personas' (Wiley, 2015).
CAC (Customer Acquisition Cost)
What it costs you, on average, to convert one new customer. Includes ad spend, sales salaries, and the tools that make those people effective. The most-underestimated number in early-stage finance.
Churn Rate
The percent of customers who cancel in a given period. The single biggest input to long-term subscription health. Small changes in churn produce huge changes in lifetime value.
GTM (Go-to-Market)
The plan for how a product reaches and is bought by its target customer. Covers positioning, pricing, channels, sales motion, and the first 90 days of distribution. Not the same as 'marketing'.
ICP (Ideal Customer Profile)
A description of the exact type of company or person who buys best from you, churns least, and refers most. Sharper and more operational than 'target audience' — used to filter sales, marketing, and product decisions.
LTV (Customer Lifetime Value)
The total profit a single customer brings in across their entire time as a customer. Used to decide how much you can afford to spend acquiring them. A predictive estimate, not a settled number.
MVP (Minimum Viable Product)
The smallest version of a product that lets you test a falsifiable hypothesis about a buyer's behavior. Coined by Frank Robinson in 2001; popularized by Eric Ries in 'The Lean Startup' (2011). Not a stripped-down launch product. A learning tool.
Product-Market Fit
The state in which a product satisfies a strong market demand such that demand pulls the product through the company. Coined by Marc Andreessen in 2007. Most rigorous measure: 40%+ of active users would be 'very disappointed' to lose the product (Sean Ellis test).
Runway / Burn Rate
Burn rate is how much cash you spend each month. Runway is how many months that cash will last given current burn. If runway falls under three months, you find a job or raise NOW.
TAM / SAM / SOM
Three market-size numbers, from biggest to smallest. TAM is the ceiling if everyone bought. SAM is who you could realistically reach. SOM is what you could actually win in the next one to three years. The last one is the one that matters.
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