Software Companies Industry Terminology

A/B Testing

A controlled experiment comparing two variants (A and B) to determine which performs better on a defined metric (e.g., conversion, retention).

Run two versions of the signup page to see which converts better | Variant B increased trial starts by 8% | We’ll ship the winning variant to 100% of traffic after a week

ACV (Annual Contract Value)

The normalized yearly value of a customer contract, often TCV divided by years, usually excluding one-time fees.

That 3-year $300k deal has a $100k ACV | Our ACV rose after we launched enterprise pricing | Sales is targeting mid-market with $25k ACV

Agile

An iterative, incremental approach to software development emphasizing collaboration, adaptability, and continuous delivery (e.g., Scrum, Kanban).

We run two-week Scrum sprints | Let’s use Kanban for the ops team | We’ll demo increments at sprint review

API (Application Programming Interface)

A set of rules and endpoints that allow software components to communicate and integrate (e.g., REST, GraphQL, webhooks).

Expose a REST API for partners | The mobile app calls our GraphQL API | Add a webhook to notify customers on status changes

ARR (Annual Recurring Revenue)

The value of contracted recurring revenue normalized to a one-year period; a core metric for subscription businesses.

ARR grew from $10M to $15M YoY | Our ARR bridge shows $2M expansion and $0.5M churn | Aim for $2M new ARR this quarter

Burn Rate

The net cash outflow per month; determines runway (months of cash remaining = cash balance ÷ monthly burn).

With a $1.2M monthly burn, we have 10 months of runway | Cut burn by renegotiating cloud costs | Track net burn, not just gross spend

CAC (Customer Acquisition Cost)

The fully loaded cost to acquire a customer (sales and marketing spend divided by new customers acquired).

Our blended CAC is $3,200 | Improve CAC payback by raising ARPU | Paid CAC spiked after we scaled ads

Churn Rate

The percentage of customers (logo churn) or recurring revenue (revenue churn) lost over a period.

Logo churn is 2% monthly | Gross revenue churn is 1.5% and net revenue retention is 115% | Reduce churn with better onboarding

CI/CD (Continuous Integration/Continuous Delivery)

Practices and tooling that automate building, testing, and deploying code changes to reduce lead time and defects.

Every commit runs tests in CI | We do daily CD to production | Add a canary step to the pipeline

Cloud-native

Architectural approach that exploits cloud elasticity, managed services, containers, and microservices for scalability and resilience.

We refactored into microservices on managed Kubernetes | Use cloud-managed databases to reduce ops toil | Design stateless services for autoscaling

Conversion Rate

The percentage of users or leads who take a desired action (e.g., signup, purchase, upgrade) within a funnel stage.

Signup conversion rose from 3% to 4% | Improve trial-to-paid conversion with in-product nudges | Optimize the lead-to-SQL conversion

Customer Success

A proactive function focused on adoption, value realization, retention, and expansion, distinct from support.

CS will run a QBR to align on outcomes | Improve the health score model | CSMs focus on adoption and expansion

DevOps

A cultural and technical movement integrating development and operations to increase deployment frequency, stability, and collaboration.

Automate infra with IaC and pipelines | Shared on-call rotates across the squad | We instrument SLIs to catch regressions

Disaster Recovery (DR)

Plans and processes to restore systems and data after major incidents; often defined by RTO (recovery time objective) and RPO (recovery point objective).

Our RTO is 2 hours and RPO is 15 minutes | Run a DR failover drill quarterly | Keep encrypted backups in a separate region

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization; a proxy for operating performance and cash generation.

We’re EBITDA-positive this quarter | Adjusted EBITDA excludes stock comp | Investors asked for our EBITDA margins trend

Enterprise Sales

Complex B2B sales to large organizations involving multiple stakeholders, long cycles, compliance, and procurement.

Expect a 6–9 month cycle with security review | The champion needs budget approval | Legal redlines the MSA and DPA

Feature Flag

A runtime switch that enables or disables features for targeted users, decoupling deploy from release.

Gate the new editor behind a flag | Roll out to 10% then ramp if metrics hold | Hotfix by toggling the feature off

GAAP (Generally Accepted Accounting Principles)

Standardized accounting rules (in the US) governing financial reporting, including revenue recognition and expense treatment.

We report under US GAAP | Revenue recognition follows ASC 606 | Auditors reviewed our GAAP adjustments

Gross Margin

Revenue minus cost of goods sold (COGS), expressed as a percentage; in SaaS, COGS includes hosting, support, third-party fees.

SaaS gross margin is 83% after cloud and support costs | Improve margin by optimizing data egress | Payments fees are inflating COGS

GTM (Go-to-Market)

The coordinated strategy to reach, sell to, and retain customers, spanning segments, channels, messaging, and pricing.

Our GTM motion is PLG with enterprise assist | Align GTM on ICP, channels, and pricing | We’re adding a partner GTM

ICP (Ideal Customer Profile)

A data-informed description of best-fit customers who realize high value at efficient acquisition and retention economics.

Our ICP is 200–2,000 employee fintechs | Update ICP after vertical wins | Score inbound leads against ICP fit

KPI (Key Performance Indicator)

A quantifiable metric that indicates progress toward a strategic objective.

Activation rate is a core KPI | Add uptime as a KPI for SRE | Tie KPIs to quarterly OKRs

Kubernetes (K8s)

An open-source platform for automating deployment, scaling, and management of containerized applications.

Migrate workloads to GKE | Use HPA for autoscaling | Blue-green deploys via services

LTV (Customer Lifetime Value)

The present value of expected gross profit from a customer over their lifetime; used with CAC to assess unit economics.

LTV/CAC is 4:1 after churn improvements | Use gross margin LTV, not revenue LTV | Enterprise cohort LTV outperforms SMB

MRR (Monthly Recurring Revenue)

The sum of normalized recurring revenue components expected each month; a key subscription metric.

Net new MRR includes new, expansion, minus churn and contraction | Our MRR bridge highlights $150k expansion | Normalize multi-year deals into MRR

MVP (Minimum Viable Product)

The smallest product that delivers core value to early adopters and enables validated learning with minimal effort.

Ship a scrappy MVP to validate demand | The MVP must solve one core job-to-be-done | Collect feedback before scaling

NPS (Net Promoter Score)

A loyalty metric calculated as promoters (9–10) minus detractors (0–6) from a 0–10 recommendation question.

Our NPS is 42 this quarter | Detractors cite onboarding issues | Launch CSAT and NPS surveys in-product

OKRs (Objectives and Key Results)

A goal-setting framework pairing qualitative objectives with measurable key results to align teams and focus execution.

Objective: Improve reliability; KR: 99.95% uptime | Cascade OKRs to team-level KRs | Grade OKRs at quarter-end

Open Source

Software whose source code is publicly available under an open license, enabling use, modification, and distribution.

We use an Apache 2.0 licensed library | Contribute fixes upstream | Consider an open-core model for monetization

Payback Period

The time (usually months) to recover CAC from gross profit generated by a customer.

CAC payback is 14 months on a gross margin basis | Improve payback with annual prepay | SMB segment has faster payback

PLG (Product-Led Growth)

A GTM motion where the product itself drives acquisition, activation, conversion, and expansion, often via self-serve and freemium.

Self-serve signup with in-app onboarding | Add usage-based expansion levers | Virality drives top-of-funnel for PLG

PMF (Product-Market Fit)

A state where a product satisfies strong market demand, evidenced by retention, engagement, and efficient growth.

40% would be very disappointed if we removed it | Retention curves flatten above 12 months | We see sales pull from the market

Retention Rate

The percentage of customers or revenue retained over a period (often split into Gross Revenue Retention and Net Revenue Retention).

GRR is 92% and NRR is 118% | Improve retention by accelerating TTV | Track logo vs revenue retention

ROI (Return on Investment)

A profitability metric showing the return relative to cost, commonly (gain − cost) ÷ cost.

Campaign ROI was 230% | Build vs buy ROI favors buying | Customer ROI case study drove enterprise wins

SaaS (Software as a Service)

Software delivered over the internet as a subscription, typically multi-tenant and continuously updated.

We sell via an annual SaaS subscription | Multi-tenant architecture reduces cost | Track ARR, MRR, churn, and NRR

Scalability

The ability of systems and organizations to handle increased load or growth efficiently, often via horizontal scaling and architectural optimization.

Horizontal scale with sharding | Cache hot paths to cut latency | Ensure the org structure scales with growth

SLA (Service Level Agreement)

A contractual commitment to specific service performance metrics (e.g., availability, response time) and associated remedies.

Contracted uptime is 99.9% with credits | 2-hour P1 response time | Define SLIs and SLOs to back the SLA

SOC 2

An attestation framework (AICPA) evaluating controls related to security, availability, processing integrity, confidentiality, and privacy (Type I/II).

We achieved SOC 2 Type II this year | Auditor reviewed our security controls | Customers request our SOC 2 report during procurement

TAM/SAM/SOM

A market sizing framework: Total Addressable Market, Serviceable Available Market, and Serviceable Obtainable Market.

Our TAM is $20B, SAM is $5B, SOM is $500M | Investors asked for bottoms-up TAM | Narrow the SAM to healthcare first

Technical Debt

The implied cost of additional rework caused by expedient technical decisions; managed via refactoring and architectural improvements.

Allocate 20% of sprint to debt paydown | Rewrite this module to reduce complexity | Debt is slowing feature velocity

Time to Value (TTV)

The time between a customer’s purchase or signup and their first meaningful realization of value from the product.

Shorten TTV with better onboarding | Prebuilt integrations accelerate TTV | Make value moments visible in the first session

Unit Economics

Per-customer revenue, cost, and margin analysis (e.g., LTV, CAC, contribution margin, payback) used to guide sustainable growth.

LTV/CAC is our primary unit metric | Improve contribution margin by cutting COGS | SMB unit economics differ from enterprise

Upsell

Increasing revenue from existing customers by upgrading plans or adding premium features, distinct from cross-sell to new products.

Move customers from Pro to Enterprise | Bundle advanced analytics as an add-on | CSMs drive upsell at renewal

Usage-based Pricing

A pricing model where fees scale with consumption of a value metric (e.g., seats, API calls, data processed).

Charge per API call beyond a free tier | Map value metric to customer outcomes | Expect natural expansion with usage

Uptime

The percentage of time a service is available; often expressed with nines (e.g., 99.9%, 99.99%).

We commit to 99.9% uptime | 99.9% allows ~8.76 hours of annual downtime | Status page shows real-time uptime

Value Proposition

A concise articulation of the customer outcomes and differentiators that make a product worth buying.

Position around time saved vs competitors | Our value prop: faster close rates for sales teams | A/B test value props on the homepage

Version Control

Systems (e.g., Git) for tracking changes to source code and coordinating collaboration across developers.

Open a PR in GitHub | Revert to the previous commit | Protect main with required reviews

Viral Coefficient

The average number of new users each existing user brings in, adjusted by invite and conversion rates; >1 implies exponential growth.

Our viral K is 0.7; aim for >1 | Referral invites convert at 12% | Add in-product sharing to raise K

WAU/MAU/DAU

Active user metrics (Daily, Weekly, Monthly Active Users) used to gauge engagement and product stickiness.

DAU/MAU is 22%, indicating stickiness | Track WAU and MAU by cohort | Push weekly features to drive WAU

Zero Trust

A security model that assumes breach and requires continuous verification of users, devices, and access, with least-privilege controls.

Enforce MFA and device posture checks | Micro-segment services; never trust by default | Verify every request with least privilege