Lesson 02 · Commercial foundations
Keep revenue, contribution and cash separate
A percentage is difficult to use until you know its base. A reseller discount expressed against the customer price is different from gross margin expressed against the vendor’s revenue. Before comparing offers, write down which revenue and costs you are using, and which period the calculation covers.
ARR is a recurring-revenue run rate at a stated date under your policy. It is not the same as the cash collected during the year or the total value of a multiyear contract. For retention, follow the customers present at the start. GRR allows for churn and contraction; NRR includes expansion from those same customers. New customers belong in the ARR bridge, not in the opening-cohort retention calculation.
Contribution is also a defined calculation. State which delivery, sales, training and allocated program costs it includes. Do not call the amount left net profit if business overhead, interest or tax is excluded. Finally, put payment dates beside the margin. A profitable deployment can still need cash before the customer pays.
Check your reasoning.
Choose one answer for each question. You can retry; the explanation is part of the lesson.
Open the answer key
1. 104%, using the opening customer cohort.
($1,000,000 − $50,000 − $30,000 + $120,000) ÷ $1,000,000 = 104%. GRR is 92%. New customers do not enter either measure.
2. Contribution under that cost policy, before excluded costs.
The label must reflect what the calculation includes. Cash timing and any excluded overhead, interest and tax remain separate.