Absorption Rate

The rate at which a company's existing customers cease doing business with it over a given period, typically expressed as an annual percentage. Customer attrition rate is a critical input to the valuation of customer relationship intangible assets under both the multi-period excess earnings method and the distributor method.

The percentage increase in a company's revenue over a specific period, typically measured year-over-year or quarter-over-quarter. Revenue growth rate is a fundamental measure of business expansion, market traction, and the effectiveness of go-to-market strategy.

The rate at which a company spends cash in excess of its income, typically expressed as a monthly figure. Burn rate is a critical metric for startups and growth-stage companies, directly determining how long the business can operate before requiring additional capital (runway).

A discount rate that incorporates a premium reflecting the specific risks associated with a particular asset, cash flow stream, or investment. In intangible asset valuations, risk-adjusted discount rates are typically higher than the weighted average cost of capital to reflect the greater uncertainty inherent in intangible asset cash flows compared to tangible assets.

The annualised rate of return that smooths out growth over multiple years, calculated as (ending value / beginning value)^(1/years) minus one. CAGR is used to compare growth trajectories of companies or metrics across different time periods.

The annualised rate of return at which the net present value of all cash flows from an investment equals zero. IRR is the standard performance metric for private equity and venture capital funds, allowing comparison across investments with different holding periods and cash flow profiles.

The minimum rate of return that a fund must achieve before the general partner becomes entitled to carried interest, or the minimum acceptable return for an investment decision. Hurdle rates are typically set between 6% and 8% in PE/VC fund structures and serve as a performance benchmark that aligns manager and investor incentives.

A quantifiable metric used to evaluate the success of an organisation, team, or initiative against its strategic objectives. Effective KPIs for growth businesses span financial (ARR, gross margin), operational (productivity, churn), and intangible (brand awareness, employee engagement) dimensions.

What is the weighted average cost of capital (WACC)?

WACC is the average cost of all capital sources (debt and equity) a company uses, weighted by their proportions — it is the minimum return the company should generate to satisfy all investors.

What is Net Revenue Retention (NRR)?

NRR measures the revenue retained from a cohort of customers plus expansion revenue (upsells, cross-sells) minus churn, expressing it as a percentage of starting revenue.

What are realistic burn rates and how do you avoid misrepresenting runway?

Founders often calculate optimistic runway (assuming perfect cost control) when actual burn is higher. Honest runway = (cash on hand) / (conservative monthly burn + 3-month buffer).

What discount rates are appropriate for valuing intangible assets?

Intangible asset discount rates typically exceed the company's WACC, reflecting higher risk — technology assets commonly use WACC + 1-3%, customer relationships WACC + 1-2%, and brands near WACC.