Revenue Under
Management.

How RUM is calculated

Period RUM is the MRR-equivalent of every active contract on day one of the period.

All non-monthly terms normalize to MRR-equivalent. A $9,000 quarterly contract is $3,000 MRR for each of the three months the customer is active. A $36,000 annual contract is $3,000 MRR for each of twelve. This normalization is not optional. Without it, contracts of different lengths distort the book and month-over-month comparison means nothing.

Start-of-period or end-of-period

Two valid definitions. The math resolves identically over time. What matters is picking one and committing to it.

• Start-of-period. Whoever is in the book on day one counts for that period.
• Customers added mid-period count toward next period. Customers who churn
• mid-period still count this period.
• End-of-period. Whoever is in the book on the last day counts. Additions
• count immediately, churn drops immediately.

Start-of-period is the default, and the reason is timing integrity rather than orientation. End-of-period creates an incentive to let an at-risk account slip into the following period rather than work it in this one, which is gaming the measurement instead of doing the work.

An earlier version of this document recommended start-of-period on the grounds that it orients a team around defending the book they walked in with. That justification is wrong and has been removed. Defending the book is the ceiling. The reason to choose start-of-period is that it cannot be gamed by moving a churn date.

The rest of this document uses start-of-period.

Levels

RUM is calculated at multiple levels. Each person sees the same customer events differently depending on scope.

• Individual book RUM. All customers managed by that person. Used for
• performance measurement and variable comp.
• Leader RUM. All customers managed by their reports.
• Org-level RUM. All active customers. Used for board reporting and growth
• math.

Most events affect all three identically. Reassignment is the exception. It affects only the individual level, because the customer stays inside the organization.

The seven customer events

Every change to RUM is one of seven event types. The rule set below defines when each hits the current period rather than the next.

Core principle. Contract changes (cancel, new, expand, contract, renew) hit the next period, because they affect what will be fulfilled going forward. Refunds and reassignments hit the current period, because money or responsibility physically left the book mid-stream.

1. Cancellation. Customer notifies you they will not renew at term end. No impact this period; they are still in their paid term and still being fulfilled. Drops at term end. Affects all levels.

2. Refund. All or part of a payment is returned. Treated as cancellation plus a financial hit. Reduces this period by the customer's MRR-equivalent, because money physically left the building this month. Customer also drops at term end. Affects all levels.

3. New customer. Signs mid-period. No impact this period. Enters the book on day one of the next at full MRR-equivalent. Affects all levels.

4. Renewal. Renews for another term. No impact; they were already in the book. Term end extends. No level changes.

5. Expansion. Existing customer increases MRR. The increase hits next period. Term resets to the expansion date plus term length. Affects all levels.

6. Contraction. Existing customer decreases MRR. The reduction hits next period. Term resets. Affects all levels.

7. Reassignment. Customer moves from one book to another, almost always because the original owner is failing them. The losing book reduces this period by the MRR-equivalent, treated as a refund at that level. The receiving book gets the customer at the start of next period, treated as new. Individual level only: leader and org RUM are unchanged, because the customer stayed inside the company.

Worked examples

An individual starts January with a $10,000 book on quarterly contracts.

The lag between decision and visibility

RUM is a lagging indicator of retention. Because cancellations do not affect it until term end, a customer who decides to leave in month one of a quarterly term does not show as a loss until month three.

In practice a team carries customers in RUM for thirty, sixty or ninety days after they have mentally left. The full impact of a bad month does not appear in the book for an entire term cycle.

This is not a defect. It accurately reflects what the team is responsible for fulfilling. It does mean RUM alone cannot manage retention proactively. Engagement signals during the paid term are the leading indicators that make it a management tool rather than a post-mortem.

A mid-term cancellation is also not dead weight. If the team can produce results during the remaining paid months, customers reactivate before term end. Save plays inside the paid term are a real lever.

What RUM does not measure

RUM is a book-sizing and revenue-fulfillment metric. Several things sit outside it and need their own tracking.

• Latent revenue. The most consequential omission. RUM
• cannot tell you what the book was ready to buy.
• Readiness. RUM knows what a customer pays. It does not know whether they
• have reached a milestone that makes the next thing useful, which is the
• difference between ready, willing, and able.
• Milestone instrumentation is a separate build.
• Reassignment frequency. One person constantly losing customers to
• reassignment is failing. Reassignments distributed across a team indicate an
• operating-consistency or customer-fit problem. RUM is silent; leadership has to
• read the pattern.
• Customer health. RUM at the individual level is a current snapshot. It does
• not indicate what is about to leak.
• Root causes. Refunds, mid-term cancellations and reassignments all have
• causes. RUM says something happened. A root-cause analysis says why.
• New sales velocity. Acquisition is not this team's responsibility, and new
• MRR is still a critical input to next period's RUM. Underperforming acquisition
• shrinks the book despite perfect retention.

Putting it into practice

1. Define the period. Usually monthly, sometimes quarterly for enterprise
2. books.
3. Normalize every contract to MRR-equivalent. The foundation. Without it
4. nothing else works.
5. Lock the seven-event rule set. Operations, finance and leadership must
6. agree on the timing of each event before anyone is measured on it.
7. Calculate at every level so each person can see how their own book is
8. moving.
9. Report latent revenue beside RUM. Not as a secondary metric. Beside it, in
10. the same view, every period. This is the change that stops RUM being a
11. retention metric.
12. Use RUM to measure, base plus variable to compensate. Tied to RUM-derived
13. metrics, never to raw RUM.
14. Layer in leading indicators. Engagement, health, milestone progress, so
15. RUM is not the only signal.

RUM is the foundation, not the structure. Build the foundation correctly, then build the practices that make it actionable.