Business and market structure
Software revenue needs to be understood by product, customer cohort and contract. Bookings, recurring revenue, recognized revenue and cash collection answer different questions. We examine the commercial definitions behind management reports before assessing growth, pricing or investment choices. The operating review considers the work required to implement, support and retain customers as well as the cost of the underlying product.
Areas of work
- Revenue composition
- Reconcile new sales, expansion, contraction and churn across customer cohorts. Separate recurring contracts from implementation, usage and other revenue that follows a different pattern.
- Packaging and pricing
- Assess product tiers, usage measures, discounts and renewal terms. Examine how the commercial structure relates to customer needs and the cost of delivering the service.
- Cost to serve
- Review infrastructure, implementation, support and customer-success requirements. Distinguish shared product costs from activities that vary by customer or segment.
- Growth and acquisition choices
- Test a new market, product extension or acquisition thesis against customer demand and operating requirements. Identify the evidence needed to support the next investment decision.
Questions to assess
- Do revenue measures reconcile across sales, finance and customer records?
- Which customers expand, contract or leave, and what does the cohort analysis show?
- How do implementation and support requirements affect segment economics?
- What would a new product or market require beyond the sales forecast?