CODITECT Financial Model — Glossary of Terms
Overview
This glossary defines all terms, acronyms, and metrics used throughout the CODITECT financial model documentation package. Terms are organized alphabetically within categories.
FINANCIAL METRICS
A
Annual Discount
Percentage reduction offered to customers who pay annually vs. monthly. Standard SaaS practice to improve cash flow and reduce churn. Model value: 20%
ARR (Annual Recurring Revenue)
MRR × 12. The annualized value of recurring subscription revenue. Primary metric for SaaS valuation.
Formula: ARR = MRR × 12
ARPU (Average Revenue Per User)
Total revenue divided by number of customers. Varies by customer segment and mix.
Blended ARPU (M12): ~$104
B
Benefits Multiplier
Factor applied to base salary to account for payroll taxes, health insurance, 401k, and other benefits.
Model value: 1.3x (30% load)
Breakeven
Point at which revenue equals expenses (EBITDA = 0). Critical milestone for cash flow planning.
Model target: Month 13 (September 2026)
Burn Rate
Monthly cash outflow when company is unprofitable. Calculated as negative operating cash flow.
Peak burn: ~$99K (Month 5)
C
CAC (Customer Acquisition Cost)
Total cost to acquire one customer, including marketing, sales, and onboarding expenses.
| Tier | CAC |
|---|---|
| Individual | $10 |
| Team | $200 |
| Enterprise | $1,000 |
Churn Rate
Percentage of customers who cancel subscription per period. Monthly churn is standard for SaaS models.
Formula: Churned Customers ÷ Starting Customers
COGS (Cost of Goods Sold)
Direct costs attributable to delivering the product/service. For SaaS: infrastructure, third-party APIs, support.
Model assumption: 15% of revenue
E
EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization)
Operating profit measure. Revenue minus operating expenses, excluding financing and accounting adjustments.
Formula: Revenue - COGS - OpEx
Effective Tax Rate
Percentage of pre-tax income paid in taxes. Applied only when EBITDA is positive.
Model value: 26.5%
G
Gross Margin
Percentage of revenue remaining after COGS. Indicates business efficiency.
Formula: (Revenue - COGS) ÷ Revenue
Model value: 85%
Gross Profit
Absolute dollars remaining after COGS.
Formula: Revenue - COGS
Growth Rate
Month-over-month percentage increase in customer count. Varies by stage.
| Period | Rate |
|---|---|
| M1-3 | 250% |
| M4-6 | 150% |
| M7-10 | 100% |
| M11-15 | 50% |
| M16+ | 40-25% |
L
LTV (Lifetime Value)
Total revenue expected from a customer over their entire relationship. Critical for evaluating CAC efficiency.
Formula: Monthly Price ÷ Monthly Churn Rate
LTV/CAC Ratio
Efficiency metric comparing customer value to acquisition cost. Healthy SaaS target: >3x.
| Tier | LTV/CAC |
|---|---|
| Individual | 4.5x |
| Team | 7.5x |
| Enterprise | 13.0x |
M
MRR (Monthly Recurring Revenue)
Total recurring revenue from subscriptions in a single month. Foundation of SaaS metrics.
Formula: Σ(Customers by tier × Price by tier)
N
Net Revenue Retention (NRR)
Revenue from existing customers including expansions minus churn. >100% indicates negative churn.
Not explicitly modeled; implied by growth + churn assumptions
O
OpEx (Operating Expenses)
All non-COGS expenses required to run the business: salaries, marketing, R&D, G&A, infrastructure.
P
Payback Period
Months required to recover CAC from customer revenue.
Formula: CAC ÷ Monthly Revenue per Customer
All tiers: <1 month
PLG (Product-Led Growth)
Growth strategy where the product itself drives acquisition, conversion, and expansion. Minimal sales involvement.
R
Runway
Months of operation remaining given current cash and burn rate.
Formula: Cash Balance ÷ Monthly Burn Rate
T
Total Funding
Cumulative capital raised from all sources.
Model value: $10.5M (Angel $500K + Seed $10M)
BUSINESS MODEL TERMS
Customer Segments
Individual
Single-user subscription tier. Typically developers using personal tools.
Price: $15/month | CAC: $10 | LTV: $45
Team
Multi-seat subscription for small teams. ~10 seats implied.
Price: $250/month | CAC: $200 | LTV: $1,500
Enterprise
Large organization subscription with compliance features. ~20 seats implied.
Price: $1,300/month | CAC: $1,000 | LTV: $13,000
Customer Mix
Customer Mix
Percentage distribution of customers across tiers. Changes over time as business matures.
M12 target: 80% Individual, 16% Team, 4% Enterprise
Retention Metrics
Retention Period
Average months a customer remains subscribed. Inverse of churn.
Formula: 1 ÷ Monthly Churn Rate
Cohort
Group of customers acquired in the same period, tracked together for retention analysis.
EXPENSE CATEGORIES
Headcount
Fully Loaded Cost
Total cost per employee including salary and benefits.
Formula: Base Salary × Benefits Multiplier
Model value: $195,000/year ($150K × 1.3)
Founder Salary
Reduced compensation for founders during early stages.
Initial: $60K/year | Post-Month 11: Market rate
Variable Expenses
Marketing
Customer acquisition and brand building expenses. Often a percentage of revenue.
Model value: 35% of revenue
R&D (Research & Development)
Product development, engineering tools, technical infrastructure.
Model value: 3.75% of revenue
G&A (General & Administrative)
Finance, legal, HR, facilities, and other corporate functions.
Model value: 10% of revenue
Cloud Storage/Infrastructure
AWS, GCP, or Azure costs for hosting and compute.
Model value: 5% of revenue
Fixed Expenses
Office
Rent, utilities, facilities. Steps up with headcount.
Model range: $1,000-$4,500/month
Subscriptions
SaaS tools (Slack, GitHub, etc.). Steps with team size.
Model range: $400-$1,200/month
REGULATORY & COMPLIANCE
FDA Compliance
21 CFR Part 11
FDA regulation governing electronic records and signatures. Requires audit trails, access controls, and validation.
IQ/OQ/PQ (Installation/Operational/Performance Qualification)
Validation documentation levels required for FDA-regulated software.
SaMD (Software as Medical Device)
FDA classification for software intended for medical purposes.
HIPAA Compliance
BAA (Business Associate Agreement)
Contract required between covered entities and vendors handling PHI.
PHI (Protected Health Information)
Any health information that can identify an individual. Subject to HIPAA protections.
Technical Safeguards
HIPAA-required controls: access control, audit logs, integrity controls, transmission security.
SOC 2
SOC 2 (System and Organization Controls 2)
Audit framework for service providers. Evaluates security, availability, processing integrity, confidentiality, privacy.
Type I vs. Type II
Type I: Point-in-time design assessment
Type II: Period-of-time operational effectiveness (typically 6-12 months)
Trust Service Criteria
Five categories evaluated in SOC 2: Security (required), Availability, Processing Integrity, Confidentiality, Privacy.
TECHNICAL TERMS
AI/ML
Agent
AI system that dynamically directs its own processes to accomplish tasks. More autonomous than workflows.
Orchestrator-Workers Pattern
Architecture where one AI (orchestrator) decomposes tasks and delegates to specialized workers.
Token
Basic unit of text processed by LLMs. Affects cost and context limits.
RAG (Retrieval-Augmented Generation)
Pattern that enhances LLM responses by retrieving relevant context from external sources.
Platform
IDE (Integrated Development Environment)
Software for writing, testing, and debugging code. Examples: VS Code, JetBrains.
Eclipse Theia
Open-source IDE framework for building custom development environments.
MCP (Model Context Protocol)
Anthropic's protocol for connecting AI models to external tools and data sources.
LSP (Language Server Protocol)
Standard protocol for programming language features in editors.
ABBREVIATIONS QUICK REFERENCE
| Abbrev. | Full Term |
|---|---|
| ARR | Annual Recurring Revenue |
| ARPU | Average Revenue Per User |
| BAA | Business Associate Agreement |
| CAC | Customer Acquisition Cost |
| CFR | Code of Federal Regulations |
| COGS | Cost of Goods Sold |
| DX | Developer Experience |
| EBITDA | Earnings Before Interest, Taxes, Depreciation, Amortization |
| FDA | Food and Drug Administration |
| G&A | General & Administrative |
| GTM | Go-To-Market |
| HIPAA | Health Insurance Portability and Accountability Act |
| IDE | Integrated Development Environment |
| LTV | Lifetime Value |
| MCP | Model Context Protocol |
| MRR | Monthly Recurring Revenue |
| NRR | Net Revenue Retention |
| OpEx | Operating Expenses |
| P&L | Profit & Loss |
| PHI | Protected Health Information |
| PLG | Product-Led Growth |
| R&D | Research & Development |
| ROI | Return on Investment |
| SaaS | Software as a Service |
| SaMD | Software as Medical Device |
| SOC | System and Organization Controls |
| SSO | Single Sign-On |
| TAM | Total Addressable Market |
| SAM | Serviceable Addressable Market |
| SOM | Serviceable Obtainable Market |
FORMULA REFERENCE
Revenue Formulas
MRR = (Ind_Customers × $15) + (Team_Customers × $250) + (Ent_Customers × $1,300)
ARR = MRR × 12
Customer Formulas
New_Customers[t] = Total_Customers[t-1] × Growth_Rate
Churned[t] = Σ(Customers_by_tier × Churn_rate_by_tier)
Total_Customers[t] = Total_Customers[t-1] + New_Customers[t] - Churned[t]
Unit Economics Formulas
LTV = Monthly_Price ÷ Monthly_Churn
LTV/CAC = LTV ÷ CAC
Payback = CAC ÷ Monthly_Price
Financial Formulas
Gross_Profit = Revenue - (Revenue × 0.15)
EBITDA = Gross_Profit - OpEx
Net_Income = EBITDA - (EBITDA × 0.265) [if EBITDA > 0]
Runway = Cash_Balance ÷ Burn_Rate
Last Updated: February 5, 2026
Author: Hal Casteel with assistance from Claude 4.5