09/15/2026
15 Business Terms Every Founder Fakes Understanding (Until They Don't) - got inspiration from Dan Martell’s Reel 🤓
Let me guess!
You're sitting in a meeting. Someone says "our net dollar retention is strong but CAC payback is creeping." Everyone nods. You nod. You have no idea what just happened.
Been there. Everyone's been there.
Here's the thing nobody tells you: these words aren't complicated. They got made complicated by people who wanted to sound smart. Let me un-complicate them.
---
The Money Coming In
MRR — Monthly Recurring Revenue
The money that shows up every single month whether you get out of bed or not.
100 customers. $50 a month. That's $5,000 MRR.
This is the number. If you only track one thing, track this one.
ARR — Annual Recurring Revenue
MRR times 12. That's it. That's the whole formula.
$5K MRR is $60K ARR. Investors love this number because it sounds bigger. Same money. Bigger number.
ACV — Annual Contract Value
What one customer is worth to you in a year.
Sign a three-year deal worth $300K? Your ACV is $100K. Don't let the big number fool you — spread it out and look at the real annual figure.
Expansion Revenue
Money from customers you already won.
They upgrade. They add seats. They buy the add-on. You didn't spend a dollar on marketing to get it.
This is the cheapest revenue on earth and most founders completely ignore it while burning cash chasing strangers.
Churn
Customers walking out the back door.
5% monthly churn means one in twenty customers leaves every month. Do that math over a year and it's terrifying.
Here's what I want you to understand: growth is filling the bucket. Churn is the hole in the bucket. You can pour water in all day long — if the hole's big enough, you're just tired and wet.
Fix the hole first.
---
The Money Going Out
CAC — Customer Acquisition Cost
What it costs you to get one new customer.
Total sales and marketing spend, divided by customers won. Spent $10K, got 20 customers? Your CAC is $500.
Most founders have never actually calculated this. They "feel" like marketing is working. Feelings are not a business model.
Gross Margin
What's left after you pay the cost of actually delivering the thing.
Sell for $100, costs you $20 to serve that customer? 80% gross margin.
Software runs high. Services run lower. If your gross margin is thin, you don't have a scaling problem — you have a math problem.
Pipeline Coverage
How much deal value you're chasing versus what you need to close.
Need $1M this quarter and you've got $3M in the pipeline? That's 3x coverage.
Why 3x? Because most deals die. They always die. If you're sitting at 1x coverage and feeling confident, you're not confident — you're about to miss your number.
---
The Money In The Bank
Net Burn
Cash out minus cash in, every month.
Spending $200K, collecting $120K? You're burning $80K a month.
Take your bank balance, divide by burn, and you get your runway — the number of months until the party ends. Every founder should know this number cold. Not roughly. Exactly.
Working Capital
Short-term assets minus short-term bills.
It's the cushion that keeps the lights on while you wait for customers to pay you. Profitable companies go under all the time because they ran out of cash waiting on invoices. Profit is an opinion. Cash is a fact.
---
What The Business Is Worth
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization.
Translation: how much cash the actual business throws off, before all the financing and accounting noise gets layered on top.
It's a rough proxy, not gospel. But it's how buyers talk.
Enterprise Value
What someone would pay for the whole thing.
Equity value, plus the debt, minus the cash. Because when you buy a company you inherit its debts and you get to keep whatever's in the bank.
---
The Money You Own
**Dilution**
Your slice getting smaller.
You own 10%. New investors come in, new shares get created, now you own 7%.
Sounds bad. Usually isn't. A smaller piece of a much bigger pie beats owning all of nothing. The founders who die on this hill tend to own 100% of a company nobody wants.
Vesting Cliff
You earn zero equity until you hit the milestone. Usually one year.
Leave at month 11? You get nothing. Walk out with exactly what you came in with.
Hit month 12 and a big chunk vests at once, then the rest drips monthly. It exists so people who quit in month three don't own a piece of your company forever.
---
The One Thing To Remember
If I took away every metric and left you with one idea, it's this:
A customer has to be worth more than what you paid to get them.
That's it. That's the whole game.
CAC is what you paid. Gross margin is what you actually keep. Churn decides how long they stick around. Expansion decides if they grow.
Everything else is decoration.
Print that on your wall. Check it every month. Most businesses that fail didn't fail because the founder was lazy — they failed because they were profitably busy at an unprofitable thing.
Don't be that founder.
