SubsSucription Ebscription Econocmonoics: m ics: How HoRewcurri Rencurrig Revenng Revenue Changes Everythinue Changes Everything g That’sTh wahyt’s wwehy d owne’ td mona’tcht m saatchles saandles ma andrk maetinrkgeti ton currentg to current ARR. ARRWe ti. We e tie it to a it to verya iverymport imaportnt maetricnt m: etricyour re: your recurrincgurri profit ng profit marginma. rgin. Recurring Profit MarginRecurring Profit Margin Your Yrecouru rrirecngu rriprofitng profit margin ma (RPM)rgin (RPM) is sim isply sim theply dtheiffere difference bnetcew beeetn ween your yorecuurrir rencgurri reveng nurevees nuaneds yourand yourrecurri recurring consgts co. Its’sts your. It’s yourARR mARRinu ms inus your CyoOGur SC, OGR&DS,, Ra&ndD ,G a&And, G bu&At b, bueforet before the spe thend spe onnd sa olesn saanlesd ma anrdk maetingrketing. . In theIn i nthecom ineco stmatee mstaenttem abentov abe, itov’s e$, 40it’s m $40illio mn,illio whichn, w represehich represents a nverts y a very healthy heamalthy rginma. rgin. This isThis the is number the number that fundsthat funds growth. growth. As long As longas your as yoursubscription subscription companycompany has ahas positive a positive RPM, RPM, you canyou choosecan choose between between growth growth and and profitabilitprofitability. If youy. If spendyou spend less thanless thanthe RPM,the RPM, you’ll you’ll grow grow less, less,but be but be profitablprofitable. If eyou. If spendyou spend more more than thanthe RPM,the RPM, you’ll you’ll grow grow mor emor, but e, but lose monelose money. y. RPM RPMis als ois hugelyalso hugely import imanportt wanhent w ithen co mit ecos tom efsu tureto fu btureudget bud agetlloc aalloc-a - tion. tioIf n. If you you start sttheart ye thear yewithar wa ithfixe ad fiamxedount am ountof ARR of, ARRthen, thenyou’ llyo knou’llw know whatw yohaut cyoanu scpenan dspen on dCOG on SCOG, R&SD, , Ran&Dd, G&Aand G&Ain or diner or toder arrive to a rriveat a at a specifispecacllyifi dcaellysire dde sRPMired .RPM Rem.e Rmbemeermb, thiser ,is this a forw is a aforwrd-lookiard-looking stanteg mstaetentm. ent. Now Nowwhat w’s htheat’ sn theum bernum thatber d thaticta tedicts howates muhowch mu yochu ca yonu s pecann dspe onn sdale ons sales and manardk metiarngketi? Thisng? iThiss another is another num bnuerm thatber yothatu wo yonu’ two finnd’t o finn dthe on in thecom ine come statemstateent,m beunt itt, b’su ht itugely’s hu importagely important. It’sn yot. Itu’sr growth your growth efficie effinccyie inncdeyx i.ndex. Growth Efficiency IndexGrowth Efficiency Index Let’s Lsetay’s yousay speyound spe $1nd m $1illio mn illioonn s aolens, s amales,r kmaeting,rketing, and candusto cmusetor mer successusc — cesins — otherin other word ws, oryourds, youreffort efforts intens idn tento grod tow gro neww bneusiwn besusis,n froesm s, from new ncueswto cmuserstom orers ol d.or Hoold.w Homawny ma nenyw nerecwurri rencgurri revenueng revenue dolla drsoll doearss does that bthatuy yo buyu you? ? This isThi yours is yourgrowth growth efficie efficiency inndcyex in (GdEexI) .( YGoEuI)r. GYoEuI tellsr GEI yo tellsu you how homuwc hm youcu’hll gro you’ll grow. w. GEI isG cEaI lcisu claatelcudl aaste grod asw groth ewxpeth nexpese/nnewse/ nAewCV. AIfC yoV. uIfr yoGEuI ri sGE greI isa tegrer ater than tha1.0,n yo 1.u’0, reyo cu’urrentlyre currently spen dispengn dimnoreg m mooren eymo onney ne own nebusiwn besusis nthesan s than you’reyo tu’akingre ta kingin. If inyo. uIfr yoGEuI ri sG leEIs iss thleassn th1.a0n, you 1.0,’ reyou spe’rend speingnd leingss thleassn than you’reyo tu’aking inre taking in, whic, hw ishi clech aisrly clea agoorly a dgoo thindg thi. ng. EfficieEfficient subnts csriptioubscription comn pcoanmiespan naiestu rnaallytu rtaallyrget ta arget GE Ia of G E1I.0 of or 1 .0le ssor, less, thoughtho initiugha initilly theally cothest coof snt ewof nsaewles smaalesy mabe yhighe be higher, as ther, as ctheom pcaonmy pany 2121 2121
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