What is Cash Flow?
Cash flow is a term within business and accounting that refers to the inflow or outflow of money for a specific period. For example, if a company uses the subscription pricing model with monthly payments, the money flow that comes in each month will be the combined subscription fee that customers pay. If the company buys a product, that money outflow will decrease the total flow of money for that month. This is because a purchase is a cash outflow. In this example, that cash inflow is also called the Monthly Recurring Revenue (MRR).
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What is a Monthly Recurring Revenue (MRR)?
A Monthly Recurring Revenue (MRR) is a term within business. Companies using a subscription pricing model will get a Monthly Recurring Revenue if their customers pay the subscription fee on a monthly basis. For example, if you have 10 customers and the subscription fee is $5, the company will have an MRR of $50. The cash flow from January’s operations will be $50, and that amount will be the same for February if no customers churn or sign up.
Having an MRR is oftentimes beneficial for software products using the SaaS business model.
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What is a Pricing Plan?
A Pricing Plan is a set of features that is sold at a specific price. Companies offering subscriptions can set up different pricing plans to attract more customers. For example, software products can set up a basic pricing plan that includes the most basic of the software product’s features at a cheaper price. The company can then charge extra for an unlimited pricing plan that unlocks all of the features.
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