Finance

Runway is the number of months a business can keep going on the cash it has today, at its current pace of spending and income: cash divided by monthly net burn.

Burn rate is how much cash a business loses each month. Net burn subtracts what came in, gross burn counts only what went out. Cash ÷ net burn gives runway.

LTV (customer lifetime value) is the gross profit one customer brings over the whole relationship. You compare it with the cost of winning that customer (CAC).

Gross margin is the share of revenue left after the cost of goods sold: (revenue - COGS) ÷ revenue × 100. At 60%, 60 agorot of each shekel remain.

A P&L (profit and loss statement, or PnL) sums up a business's revenue and expenses for a period and shows if it made or lost money. Profit on it is not cash.

Cash flow is the money coming into and going out of a business's account in a period. A profitable business can still run short of cash when customers pay late.

Overhead is the indirect cost of running a business, like rent, bookkeeping, insurance and admin salaries, that cannot be traced to one product or customer.

ROI (return on investment) is a percentage showing what an investment earned net of its cost: the gain from it minus its cost, divided by the cost, times 100.

The break-even point is the sales level where revenue covers all costs, no profit and no loss: fixed costs ÷ what each sale leaves after variable costs.

Revenue is everything a business sold in a period, before any costs and without the VAT on the invoice. It is the P&L's top line, not profit and not cash.

COGS (cost of goods sold) is the cost of the goods or services sold in a period: goods, materials and direct labour. Revenue minus COGS is gross profit.

Gross profit is revenue minus the cost of goods sold (COGS): what is left from sales after goods, materials and direct labour. Rent and salaries come from it.

Net profit is what a business keeps from revenue after every expense, cost of sales, running costs, interest and tax. It is the bottom line, not cash.

LTV:CAC is the ratio of the gross profit a customer brings over the relationship (LTV) to what it cost to win them (CAC). 3:1 is a common SaaS rule of thumb.

MRR (monthly recurring revenue) is what active subscriptions and retainers are worth per month, without one off fees. 40 members at ₪350 is ₪14,000 MRR.

ARR (annual recurring revenue) is the yearly value of the recurring subscriptions and contracts active today, usually MRR × 12. A snapshot, not a forecast.

Churn is the share of customers, or of recurring revenue, lost in a period: those who left in a month divided by those at its start. 5% a month is 46% a year.

NRR (net revenue retention) is the share of last year's recurring revenue the same customers pay now, upgrades and cancellations included. Over 100% is growth.