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Trailing Period

The Trailing Period setting enables you to view your metrics over a longer time frame, which can help smooth out monthly fluctuations and reveal how a company is trending. Trailing Period is off by default for all charts (except Retention) and can be set to 3, 6, or 12 months. There are two different ways Trailing Period is applied, depending on the type of metric.

Growth Accounting Metrics

When applied to Growth Accounting metrics, Trailing Period changes which month is used as the reference when growth categories (New Sales, Net New, Expansion, Resurrection, Contraction, and Churn) are calculated. For example, for September 2022, MRR growth categories are calculated by comparing customers’ MRR in September 2022 to August 2022. However, if Trailing Period is set to 3 months September 2022 will be compared to June 2022, 3 months prior. Following this example:

  • Retained MRR: The lesser of June and September MRR from customers active in June
  • New Sales MRR: September MRR from customers added in July, August, and September
  • Resurrected MRR: September MRR from customers active previous to June, not active in June, and active in September
  • Expansion MRR: The increase in MRR from June to September from customers active in June
  • Contraction MRR: The decrease in MRR from June to September from customers active in June and September
  • Churned MRR: June MRR for customers not active in September

Ratio Metrics

Applies to CAC, Magic Number, CAC Payback Period, Gross Margin, Burn, and Runway

For metrics that are ratios, the numerator and the denominator use the sum of trailing 3, 6, or 12 months. For example, if the Trailing Period is 6 months for Burn Multiple, in September:

Burn Multiple = (March Cash Balance — September Cash Balance) ÷ (September ARR - March ARR)

Note that in CAC Payback, the “New Sales MRR” part of the calculation uses the Growth Accounting Methodology done above.

Burn & Runway is an exception to some of the above rules: Burn will calculate as the average burn over the selected trailing period. In monthly aggregation Burn will be the average monthly burn, but in Quarterly/Annual aggregation it will be the average Quarterly/Annual Burn. Runway will always be the current cash balance divided by the average monthly burn over the selected period.

The S&M Offset can be used in conjunction with Trailing Period. For example, CAC Payback for September with a 6 Month Trailing Period and 3 month S&M offset will use new customers from April to September and S&M expenses from January to June.

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Stage Conversion Rate

Stage Conversion Rate is the While Pipeline Value sums the total ARR of active opportunities in pipeline, weighted pipeline is weighted based on the current deal stage. Weighted pipeline value is a more accurate estimate of Closed Won ARR based on the current pipeline value.

How do I calculate pipeline?

Let's assume we have the following list of opportunities currently active in our sales process:

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Deal Name

Sales Owner

Stage

ARR

ACME Corp. - New Business
Bugs Bunny
Stage 1
$10,000
Bonner Books - Upsell
Bugs Bunny
Stage 2
$25,000
CHOAM - New Business
Daffy Duck
Stage 2
$15,000
Daedalus Research - Upsell
Daffy Duck
Stage 3
$30,000
Bugs Bunny
Electric Enterprise - New Business
Stage 3
$50,000
$20,000
Fabulous Factories - New Business
Daffy Duck
Closed Lost

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The total pipeline for these opportunities is $130,000. Additionally, we can also get pipeline totals for our two sales reps: Bugs Bunny ($85,000) and Daffy Duck ($45,000).

Note that Fabulous Factories - New Business is omitted from this sum, as the stage is marked as "Closed Lost".

We can summarize our pipeline by Stage to understand how much ARR is in each step of the sales process. To summarize the Pipeline ARR by Stage, we generate the following ARR table:

Stage 1 Pipeline

Stage 2 Pipeline

Stage 3 Pipeline

Total Pipeline

$10,000
$40,000
$80,000
$130,000

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While we have the total pipeline value here, we can apply the weightings to more accurately estimate how much of the pipeline ARR will be Closed Won.

What is probability to close?

Probability to Close is a percentage that estimates how much of the ARR that is in a particular stage of a pipeline is expected to be Closed Won. Typically, Probability to Close will be lower in earlier stages of the sales process and higher in later stages of the sales process.

If we multiply the probability to close by the Pipeline ARR, we'll get the Weighted Pipeline ARR value in each stage.

Stage 1

Stage 2

Stage 3

Pipeline ARR ($)

$10,000

$40,000
$80,000

Probability to Close (%)

25%
40%
65%
$2,500
$16,000
$52,000

Weighted Pipeline ARR ($)

Probability to Close assumptions for each stage assume that deals in different stages have a different chance of being won. Deals in Stage 1 are 25% likely to be won, while deals in Stage 2 are 40% likely to be won, and deals in Stage 3 are 65% likely to be won.

After applying the probability to close to the Pipeline ARR, we now have $2,500 in Stage 1, $16,000 in Stage 2, and $52,000 in stage 3, for a total weighted pipeline value of $70,500. This estimate is closer to the real value we expect to have in Closed Won ARR.