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Every term, defined.

Finance runs on shorthand, and shorthand is how an owner ends up nodding along to a number they could not recompute. These are the terms behind Know Your Numbers, in plain English, each with the calculations that use it.

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1120-S
The federal income tax return an S corporation files.
Used in S-Corp Salary vs. Distribution
13-week cash flow
A week-by-week forecast of cash in and cash out over the next quarter. Where a crunch shows up before it lands.
Used in 13-Week Cash Flow
2/10 net 30
Supplier shorthand: take 2% off if you pay within 10 days, otherwise the full amount is due in 30.
Used in Early-Payment Discount
504
The SBA program for real estate and major equipment, funded jointly by a bank and a Certified Development Company.
Used in Debt Service Coverage Ratio
7(a)
The SBA's main guaranteed loan program, used for working capital, acquisitions and refinancing.
Used in Debt Service Coverage Ratio, Loan Payment & True APR
ACV Annual contract value
What one customer contract is worth over a year. Used to segment customers by size.
Used in Gross Revenue Retention, Customer (Logo) Churn, CAC Payback Period
Add-back
A cost added back to reported profit because a buyer would not incur it — the owner's above-market salary, a one-time legal bill. Undocumented add-backs get removed in diligence.
Used in Adjusted EBITDA, Global DSCR
AGI Adjusted gross income
Total income less specific adjustments. The figure most tax thresholds key off.
Used in Quarterly Tax Set-Aside
AP Accounts payable
Money you owe suppliers but have not yet paid.
Used in Net Working Capital Peg, 13-Week Cash Flow
APR Annual percentage rate
The true annual cost of borrowing with fees included. The only basis on which two loan offers can be compared.
Used in Loan Payment & True APR, Factor Rate → True APR
AR Accounts receivable
Money customers owe you but have not yet paid.
Used in Days Sales Outstanding, Quick Ratio (Acid Test), Net Working Capital Peg, 13-Week Cash Flow
ARPA Average revenue per account
Total recurring revenue divided by the number of customers, for a given period.
Used in CAC Payback Period, Lifetime Value
ARR Annual recurring revenue
Contracted recurring revenue over twelve months. Normalized monthly recurring revenue times twelve, not last year's total sales.
Used in Revenue Growth Rate, MRR / ARR, ARR Bridge (Waterfall), Net Revenue Retention, Customer Acquisition Cost, Burn Multiple, Rule of 40, Revenue per Employee
B2B Business to business
Selling to other companies rather than to consumers.
Used in Revenue Growth Rate, Card Processing Effective Rate
BBB Better Business Bureau
Its Wise Giving Alliance publishes the accountability standards many funders judge non-profits against.
Used in Program Expense Ratio, Cost to Raise a Dollar
Benchmarkit
A benchmarking firm publishing annual B2B SaaS operating metrics.
Used in Gross Revenue Retention, CAC Payback Period
BizBuySell
A small-business-for-sale marketplace that publishes a quarterly transaction report.
Used in Enterprise Value from a Multiple
BLS U.S. Bureau of Labor Statistics
The federal agency that publishes wage, benefit and employment cost data.
Used in Burden Rate & Cost per Productive Hour
Bootstrapped
Funded from revenue and the owners' own money rather than outside investment.
Used in Revenue Growth Rate, Net Revenue Retention, OpEx by Function (% of Revenue), Revenue per Employee
Burden rate
Everything an employee costs beyond their wage — payroll taxes, insurance, benefits, workers' comp — as a percentage of that wage.
Used in Burden Rate & Cost per Productive Hour
Burn multiple
Net cash burned for every dollar of new recurring revenue added. Lower is better.
Used in Burn Multiple
CA Current assets
Cash and anything else expected to turn into cash within twelve months.
Used in Working Capital & Current Ratio
CAC Customer acquisition cost
Everything spent to win one new customer — ad spend plus the salaries, benefits and tools behind it.
Used in Customer Acquisition Cost, CAC Payback Period, LTV : CAC
CAGR Compound annual growth rate
The single yearly rate that would take you from the starting figure to the ending figure over the period. It smooths a lumpy run into one number.
Used in CAGR
CAM Common area maintenance
The landlord's charge for shared costs — parking, landscaping, common utilities — billed on top of base rent.
Used in Occupancy Cost Ratio
Capex Capital expenditure
Money spent on long-lived assets — equipment, vehicles, buildout — rather than on running costs.
Used in EBITDA & EBITDA Margin, Free Cash Flow, Debt Service Coverage Ratio, Fixed Charge Coverage Ratio
Carrying cost
The annual cost of holding inventory: capital tied up, storage, insurance, obsolescence and retail shrink.
Used in Inventory Carrying Cost
CCC Cash conversion cycle
Days inventory plus days receivable minus days payable. How long your cash is tied up between paying out and getting paid.
Used in Cash Conversion Cycle
CDC Certified Development Company
A nonprofit licensed by the SBA to underwrite and fund the second-lien portion of a 504 loan.
Used in Debt Service Coverage Ratio
ChartMogul
A subscription analytics company that publishes retention benchmarks drawn from its customer base.
Used in Net Revenue Retention
Churn
Customers or revenue lost in a period. Logo churn counts relationships; revenue churn counts dollars.
Used in ARR Bridge (Waterfall), Gross Revenue Retention, Customer (Logo) Churn, Lifetime Value
CL Current liabilities
Everything owed within the next twelve months.
Used in Working Capital & Current Ratio
CM Contribution margin
What one more sale leaves after every cost that moves with it, including variable selling costs. The number that should set your prices.
Used in Price Change Break-Even Volume, Product & Menu Mix
COGS Cost of goods sold
The direct cost of delivering what you sold — materials, direct labor, hosting, delivery. Everything else is operating expense.
Used in Gross Margin, Days Payable Outstanding, Days Inventory / Inventory Turns, Prime Cost, Actual vs. Theoretical Cost Variance
Cohort
A group of customers who started in the same period, tracked together over time so you compare like with like.
Used in Net Revenue Retention, Gross Revenue Retention, Lifetime Value
Contraction
Revenue lost from customers who stayed but spent less. Distinct from churn, and often mistaken for it.
Used in ARR Bridge (Waterfall), Gross Revenue Retention
Covenant
A condition in a loan agreement — a ratio to maintain, a report to file. Breaching one can make the loan callable even if every payment is current.
Used in Fixed Charge Coverage Ratio, Interest Coverage Ratio, Days to Close
CPA Certified Public Accountant
A state-licensed accountant. Countabl is not a CPA firm and does not provide tax, audit or attest services.
CY Calendar year
A year running January to December, as distinct from a fiscal year.
Used in Revenue Growth Rate, Gross Revenue Retention, Gross Margin, OpEx by Function (% of Revenue), CAC Payback Period, SaaS Magic Number, Rule of 40
D&A Depreciation and amortization
The accounting write-down of assets over their useful lives. A non-cash expense.
Used in Seller's Discretionary Earnings (SDE)
DealStats
A database of completed private-company transactions, used to source valuation multiples.
Deltek
The professional-services software firm that now publishes the SPI Research benchmark.
Used in Utilization, Realization & Effective Rate
Dilution
The fall in your ownership percentage when new shares are issued.
Used in Dilution & Post-Money Ownership
DIO Days inventory outstanding
The average number of days inventory sits before it sells.
Used in Days Inventory / Inventory Turns, Cash Conversion Cycle
DPO Days payable outstanding
The average number of days you take to pay your suppliers.
Used in Days Payable Outstanding, Cash Conversion Cycle
DSCR Debt service coverage ratio
Cash available for debt service divided by the principal and interest due. The single number that decides whether a bank lends.
Used in Debt Service Coverage Ratio, Global DSCR, Interest Coverage Ratio
DSO Days sales outstanding
The average number of days between invoicing a customer and collecting the cash.
Used in Days Sales Outstanding, Days Payable Outstanding, Cash Conversion Cycle
Earnout
Part of the price paid later, only if the business hits agreed targets. Often where customer-concentration risk gets pushed.
Used in Customer Concentration, EV → Equity Value Bridge
EBIT Earnings before interest and taxes
Operating profit after depreciation and amortization but before financing costs and tax.
Used in Interest Coverage Ratio
EBITDA Earnings before interest, taxes, depreciation and amortization
Operating profit before financing costs and accounting choices. The earnings base most buyers and every lender start from.
Used in Customer Concentration, EBITDA & EBITDA Margin, Adjusted EBITDA, Seller's Discretionary Earnings (SDE), Operating & Net Margin, Rule of 40, Free Cash Flow, Debt Service Coverage Ratio, Fixed Charge Coverage Ratio, Debt-to-EBITDA (Leverage), Enterprise Value from a Multiple, Revenue Multiple, The SDE / EBITDA Multiple Trap, Quality of Earnings Adjustment
Effective rate
What you truly earn per hour after utilization and realization are applied to your headline rate.
Used in Utilization, Realization & Effective Rate, Card Processing Effective Rate
Employee turnover
Staff leaving and being replaced. In American usage turnover means people, never revenue.
Used in Cost of Employee Turnover
Equity value
What actually reaches the seller: enterprise value less debt, plus cash, after the working capital adjustment, escrow and fees.
Used in EV → Equity Value Bridge
Escrow
Part of the price held back after closing to cover claims that surface later.
Used in Customer Concentration, EV → Equity Value Bridge
EV Enterprise value
The value of the whole business before debt and cash are settled. Not what the seller receives.
Used in Seller's Discretionary Earnings (SDE), Enterprise Value from a Multiple, EV → Equity Value Bridge, Revenue Multiple
Expansion
Extra revenue from customers you already have — upgrades, added seats, higher usage.
Used in ARR Bridge (Waterfall)
Factor rate
The multiplier a merchant cash advance quotes instead of an interest rate. It hides the term, so a shorter payback makes it more expensive, not less.
Used in Factor Rate → True APR
FCCR Fixed charge coverage ratio
Coverage of every fixed obligation, not just debt — leases, preferred dividends and, in some agreements, owner distributions.
Used in Interest Coverage Ratio
FCF Free cash flow
Cash left after running the business and paying for the equipment and software it needs. What a buyer is really buying.
Used in Free Cash Flow
FICA Federal Insurance Contributions Act
The payroll tax funding Social Security and Medicare, split between employer and employee.
Used in Burden Rate & Cost per Productive Hour, Overtime vs. a New Hire, S-Corp Salary vs. Distribution
Float
The days between when you owe money and when you actually part with it.
Used in Early-Payment Discount
FLSA Fair Labor Standards Act
The federal law setting minimum wage, overtime and recordkeeping rules.
Used in Overtime vs. a New Hire
Forecast accuracy
How close your projections came to what happened, scored over time so the next forecast can be believed.
Used in Forecast Accuracy
FTE Full-time equivalent
One full-time headcount, or the sum of part-time hours that add up to one.
Used in Revenue per Employee
Fully loaded
A cost with everything on top of the base included — payroll taxes, benefits, tools, space and recruiting, not just salary.
Used in Cost of the Finance Function, Customer Acquisition Cost, Fully-Loaded Cost of a Hire, Overtime vs. a New Hire
FUTA Federal Unemployment Tax Act
The federal unemployment payroll tax, paid by the employer.
Used in Overtime vs. a New Hire
G&A General and administrative
Overhead: finance, legal, human resources, insurance, rent and the rest of running the company.
Used in OpEx by Function (% of Revenue), Cost of the Finance Function
GAAP Generally Accepted Accounting Principles
The standard U.S. accounting rulebook. Lenders and buyers assume it unless you tell them otherwise.
Used in WIP: Over- and Under-Billing, Rule of 40
GF Data
A subscription database of private-equity-sponsored deals in the $10–250M range.
GMROI Gross margin return on inventory investment
Gross profit earned per dollar of inventory carried. Which categories deserve your buying dollars.
Used in GMROI
Gross burn
Total cash going out each month, before any revenue is counted.
Used in Burn Multiple, Gross Burn & Net Burn
GRR Gross revenue retention
Net revenue retention with upgrades stripped out. It can never exceed 100%, which makes it the honest floor.
Used in Gross Revenue Retention
H.15 Federal Reserve Statistical Release H.15
The Federal Reserve's published table of selected interest rates, including bank prime — the base most variable business loans are priced off.
Used in Loan Payment & True APR
Headcount
The number of people employed, used as a planning unit for cost and capacity.
Used in Fully-Loaded Cost of a Hire
IBBA International Business Brokers Association
The trade body whose quarterly Market Pulse survey reports what broker-intermediated small businesses actually sell for.
Used in Enterprise Value from a Multiple
ICONIQ
An investment firm whose periodic reports benchmark growth-stage software operating metrics.
Inventory turns
How many times inventory sells through and is replaced in a year.
Used in Days Inventory / Inventory Turns
IRS Internal Revenue Service
The federal tax authority.
Used in Quarterly Tax Set-Aside, S-Corp Salary vs. Distribution
Job fade
Margin quietly disappearing on a job as it runs — the reason the WIP schedule is worth keeping current.
Used in WIP: Over- and Under-Billing
Keystone
Retail shorthand for doubling cost to set the price — a 100% markup, which is a 50% margin.
Used in Markup vs. Margin
LER Labor efficiency ratio
Gross profit divided by fully burdened direct labor cost. Whether your people generate enough margin to carry your overhead.
Used in Labor Efficiency Ratio
Liquidation preference
An investor's contractual right to be paid before common shareholders at a sale, and how much.
Used in Liquidation Preference Waterfall
LPRC Loss Prevention Research Council
The research body that co-publishes shrinkage data with the National Retail Federation.
Used in Inventory Carrying Cost
LTV Lifetime value
The gross profit one customer is expected to produce before they leave.
Used in Lifetime Value, LTV : CAC
MAGI Modified adjusted gross income
Adjusted gross income with certain deductions added back, used to phase out particular tax benefits.
Used in Overtime vs. a New Hire
Magic number
New recurring revenue produced per dollar of sales and marketing spend. Above 1.0 means the engine pays for itself within the year.
Used in SaaS Magic Number
Markup
The percentage added to cost to reach the price. Not the same as margin — a 30% markup is a 23.1% margin.
Used in Markup vs. Margin
MFJ Married filing jointly
The filing status for a married couple filing one return together.
Used in Overtime vs. a New Hire, Quarterly Tax Set-Aside, S-Corp Salary vs. Distribution
MRR Monthly recurring revenue
The contracted, repeating revenue booked in a month. One-time fees and services work are excluded.
Used in MRR / ARR
Net burn
Cash out minus cash in — what the balance actually falls by each month. When someone says burn, this is usually what they mean.
Used in Burn Multiple, Gross Burn & Net Burn, Runway
NOL Net operating loss
A tax loss larger than income, carried forward to offset profit in later years.
Used in Equipment: Lease vs. Buy
NRF National Retail Federation
The retail industry trade association, co-publisher of the National Retail Security Survey.
Used in Inventory Carrying Cost
NRR Net revenue retention
What last year's customers are worth this year, including upgrades, downgrades and cancellations, but excluding anyone new. Above 100% means the base grew on its own.
Used in Gross Revenue Retention, Lifetime Value
NWC Net working capital
Working capital as a deal defines it — receivables plus inventory plus prepaids, less payables and accruals. The figure a buyer sets a target against.
Used in Net Working Capital Peg
OBBBA One Big Beautiful Bill Act
The 2025 federal tax law that, among other changes, made 100% bonus depreciation permanent for property acquired after January 19, 2025.
Used in Equipment: Lease vs. Buy
Occupancy cost
Base rent plus common area maintenance, taxes, insurance and percentage rent, as a share of sales.
Used in Occupancy Cost Ratio
One-time revenue
Revenue from a single sale or project with nothing contracted behind it.
Used in MRR / ARR, Recurring Revenue Mix
Open-to-buy
The budget available to purchase new inventory in a period, given what you already own and expect to sell.
Used in GMROI
Operating reserve
Unrestricted cash a non-profit can spend if funding stops, expressed as months of operating expense.
Used in Months of Operating Reserve
OpEx Operating expense
The cost of running the business that is not direct cost of delivery — rent, admin, most salaries, software.
Used in Gross Margin, OpEx by Function (% of Revenue), Cost of the Finance Function, Net Working Capital Peg
Option pool
Shares set aside for future employee grants. Created pre-money, the existing shareholders fund it alone.
Used in Dilution & Post-Money Ownership
OT Overtime
Hours paid at a premium rate, generally 1.5× regular pay under federal rules.
Used in Overtime vs. a New Hire
P&L Profit and loss statement
The income statement: revenue, costs and what is left, over a period.
Used in Gross Burn & Net Burn, Days to Close
Payback period
How many months of gross profit it takes to earn back what you spent acquiring the customer.
Used in CAC Payback Period
PE Private equity
Investment firms that buy controlling stakes in established companies. They pay different multiples from individual buyers, which is why the dataset matters.
Used in OpEx by Function (% of Revenue), Enterprise Value from a Multiple
Peg
The target level of working capital a seller must deliver at closing, set from the company's own history. Deliver less and the price is adjusted down.
Used in Days Payable Outstanding, Net Working Capital Peg
Percentage-of-completion
Recognizing revenue on a long job in proportion to the work done, rather than when it is billed or paid.
Used in WIP: Over- and Under-Billing
PLG Product-led growth
A model where the product itself drives sign-up and expansion, usually self-serve, with little or no sales contact.
Used in Net Revenue Retention
Pre-money
A company's agreed value before new investment goes in. Post-money is that figure plus the new money.
Used in Dilution & Post-Money Ownership
Prime cost
Food and beverage cost plus total labor cost, as a share of sales. The single control number in food service.
Used in Prime Cost
PTO Paid time off
Vacation, holiday and sick hours — paid, but not productive, which is why they come out of the denominator.
Used in Burden Rate & Cost per Productive Hour
PV Present value
What a future stream of money is worth today, once you discount it for the time and risk between now and then.
Used in Equipment: Lease vs. Buy
QBI Qualified business income
The pass-through profit eligible for the Section 199A deduction of up to 20%.
Used in Quarterly Tax Set-Aside, Your True Marginal Rate, S-Corp Salary vs. Distribution
Quality of earnings
An independent accountant's review of whether reported profit is real and repeatable. Usually moves the number.
Used in Quality of Earnings Adjustment
R&D Research and development
Product and engineering cost.
Used in OpEx by Function (% of Revenue)
Ramp
The time a new hire takes to reach full productivity, and the output lost in the meantime.
Used in Cost of Employee Turnover
Realization
The share of billed hours you actually collect at full rate, after write-downs and discounts.
Used in Utilization, Realization & Effective Rate
Recurring revenue
Revenue under contract that repeats without a new sale — subscriptions, retainers, maintenance agreements. A customer who happens to reorder is repeat revenue, which prices differently.
Used in Recurring Revenue Mix, Burn Multiple
Retail shrink
Inventory that vanishes — theft, damage, error — measured as a percentage of sales.
Used in Inventory Carrying Cost
Revolver
A revolving line of credit you can draw on and repay repeatedly, rather than a term loan with a fixed schedule.
Used in Interest Coverage Ratio
Runway
Months until the cash runs out at your current rate of burn.
Used in Runway
S corporation
A tax election, not a company type. Profit passes through to the owner, who must take reasonable W-2 wages first.
Used in S-Corp Salary vs. Distribution
S&M Sales and marketing
Everything spent to win customers — people, programs, tools and commissions.
Used in OpEx by Function (% of Revenue), Customer Acquisition Cost, SaaS Magic Number
SaaS Capital
A lender to recurring-revenue software companies that runs an annual private-company survey.
Used in Revenue Growth Rate, Net Revenue Retention, Revenue per Employee
SAFE Simple Agreement for Future Equity
An investment that buys no shares now and converts to equity at the next priced round, usually with a valuation cap or a discount. It is not debt and carries no interest or maturity date.
Used in Dilution & Post-Money Ownership
Safe harbor
Paying a set share of last year's or this year's tax through the year to avoid an underpayment penalty, whatever the final bill turns out to be.
Used in Quarterly Tax Set-Aside
SBA U.S. Small Business Administration
The federal agency that guarantees the 7(a) and 504 loan programs. Its rules set what banks can and cannot approve.
Used in EBITDA & EBITDA Margin, Debt Service Coverage Ratio, Global DSCR, Debt-to-Equity, Quality of Earnings Adjustment, Loan Payment & True APR
Schedule AI Annualized Income Installment Method
The Form 2210 schedule that lets a business with uneven income match its estimated tax payments to when the income was actually earned.
Used in Quarterly Tax Set-Aside
Schedule C
The federal form a sole proprietor uses to report business profit or loss.
Used in Your True Marginal Rate
SDE Seller's discretionary earnings
Pre-tax profit plus one working owner's full compensation, interest, depreciation and one-off costs. What a single owner-operator actually takes home.
Used in Seller's Discretionary Earnings (SDE), Enterprise Value from a Multiple, The SDE / EBITDA Multiple Trap
SE Self-employment tax
Social Security and Medicare tax paid by the owner of an unincorporated business, covering both halves — 15.3% on 92.35% of net profit.
Used in Quarterly Tax Set-Aside, Your True Marginal Rate
SEP Simplified Employee Pension
An employer-funded retirement plan for the self-employed and small employers. Contribution room is tied to compensation.
Used in S-Corp Salary vs. Distribution
SMB Small and medium-sized business
Smaller companies, as distinct from enterprise buyers. Where the benchmark data differs, this page says so.
Used in CAC Payback Period, Cash Conversion Cycle, Debt-to-EBITDA (Leverage), Revenue Multiple
SOP Standard Operating Procedure
The SBA's lending rulebook. SOP 50 10 is the version that governs 7(a) and 504 origination.
Used in Debt Service Coverage Ratio, Quality of Earnings Adjustment
SPI SPI Research
The professional-services research firm, now part of Deltek, behind the annual Professional Services Maturity Benchmark.
Used in Utilization, Realization & Effective Rate
SSA Social Security Administration
The federal agency that sets and publishes the Social Security wage base each year.
Used in Burden Rate & Cost per Productive Hour, Quarterly Tax Set-Aside
SSTB Specified service trade or business
A category — law, accounting, consulting, health and others — whose owners lose the Section 199A deduction above an income threshold.
Used in S-Corp Salary vs. Distribution
Surety
The bonding company that guarantees a contractor will complete a job. It underwrites off working capital and the WIP schedule.
Used in WIP: Over- and Under-Billing
SUTA State Unemployment Tax Act
The state unemployment payroll tax, paid by the employer at a rate that varies by state and claims history.
Used in Overtime vs. a New Hire
Table turns
How many times a restaurant seat is filled again in a service. A different sense of the word from inventory turns.
Used in Capacity Utilization
Utilization
The share of paid hours that are billable.
Used in Break-Even Hourly Rate, Utilization, Realization & Effective Rate, Capacity Utilization
Variance
The gap between what you budgeted and what happened.
Used in Budget vs. Actual Variance, Days to Close, Actual vs. Theoretical Cost Variance
VC Venture capital
Investors who take minority stakes in high-growth companies.
Used in OpEx by Function (% of Revenue)
W-2
The wage statement an employer issues to an employee. Owner W-2 wages matter for both the S-corp test and the Section 199A limit.
Used in Global DSCR, S-Corp Salary vs. Distribution
Waterfall
The order in which sale proceeds are paid out, class by class, until nothing is left.
Used in ARR Bridge (Waterfall), Liquidation Preference Waterfall
WC Working capital
Current assets minus current liabilities. What you own that turns to cash within a year, less what falls due in the same window.
Used in Working Capital & Current Ratio
WIP Work in progress
Jobs started but not finished. The schedule that shows whether you have billed ahead of the work or behind it.
Used in WIP: Over- and Under-Billing

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