SaaS and B2B Fundamentals

The annualized value of a customer contract, the standard unit for measuring deal size in annual-contract AI SaaS or agentic businesses.

The total value of recurring revenue an AI SaaS or agentic business expects over a 12-month period, the primary top-line metric for annual-contract businesses (the monthly-contract equivalent is MRR).

Software sold on a subscription basis to other businesses rather than individual consumers, typically characterized by longer sales cycles, multiple stakeholders, and post-sales expansion revenue as a major growth driver.

Three distinct financial concepts that are often confused. Bookings are the total contract value signed, Billings are what's actually invoiced, and Revenue is what's recognized over time as the service is delivered. A company can have strong bookings and weak revenue recognition if contracts are long-term.

A group of customers who share a common starting point, typically the month they signed up, tracked together over time to observe how their behavior (usage, revenue, churn) evolves relative to other cohorts.

Source note: Definition grounded in David Skok's SaaS Metrics 2.0 framework (forEntrepreneurs.com).

The standard way B2B AI SaaS or agentic software companies segment customers by size, typically by employee count or revenue. Enterprise (large, complex, high-touch), SMB (small, self-serve-friendly, high-volume), Mid-Market (in between, often the fastest-growing segment for scaling companies).

A pricing model offering a free, limited version of a product to drive adoption, with paid tiers unlocking additional features, capacity, or seats. Distinct from a free trial, which is time-limited rather than feature-limited.

A description of the type of company most likely to get value from your product and become a successful, retained customer, used to focus marketing, sales, and product investment on the accounts most likely to succeed.

A go-to-market motion where a company starts with a smaller initial deal ("land") and grows the account's spend over time through upsells, cross-sells, and seat expansion ("expand"), rather than trying to close the largest possible deal upfront.

The total value of recurring revenue an AI SaaS or agentic business expects each month, the primary top-line metric for monthly-contract SaaS businesses (the annual-contract equivalent is ARR).

When expansion revenue from existing customers (upsells, cross-sells, seat growth) more than offsets revenue lost to churn within the same customer base, meaning your installed base grows in value even without adding a single new customer.

Source note: Grounded in David Skok's SaaS Metrics 2.0 framework (forEntrepreneurs.com), which identifies negative churn as "the ultimate solution to the churn problem."

A pricing model where cost is tied to a measurable business outcome the customer achieves, revenue generated, cost saved, a specific result delivered, rather than to seats or raw consumption. It ties vendor and customer incentives together more tightly than any other common SaaS pricing model, but only works when the outcome is clearly attributable to the product and reliably measurable.

A go-to-market strategy where the product itself, not a sales team, is the primary driver of customer acquisition, conversion, and expansion, often paired with free trials or freemium pricing.

Everything that happens with a customer after the initial contract is signed: onboarding, adoption, support, renewal, and expansion. In modern B2B software businesses, post-sales is where the majority of lifetime revenue is actually won.

A go-to-market strategy where a sales team, rather than the product itself, is the primary driver of customer acquisition, typical for higher-priced, higher-complexity B2B products with longer sales cycles.

A pricing model where cost scales with the number of individual named users (seats) with access to the product, the traditional B2B SaaS pricing default, and the model BaseDynamics deliberately avoids for internal collaboration.

A framework for sizing a market: TAM (Total Addressable Market, everyone who could theoretically use the product), SAM (Serviceable Addressable Market, the portion you can realistically reach), SOM (Serviceable Obtainable Market, the portion you can realistically capture given competition and resources).

A pricing model where cost scales with actual consumption (events processed, documents analyzed, API calls made) rather than seat count, aligning cost directly with the value or footprint a customer is getting.