MRR
Monthly recurring revenue
Recurring subscription revenue normalized to one month. Exclude one-time services and setup fees.
SaaS metrics guide
SaaS metrics: formulas, meaning and common mistakes
A metric is useful only when its scope, period, denominator and revenue definition are clear. This guide connects the recurring-revenue metrics that founders, operators and buyers use to understand growth quality.
Scope note: Definitions vary by business model. Keep the same treatment of discounts, refunds, usage revenue and annual contracts when comparing periods.
ARR
Annual recurring revenue
A run-rate view of recurring revenue, commonly modeled as MRR × 12. It is not the same as cash collected.
Churn
Customer or revenue loss
Name the denominator and period. Logo churn and revenue churn answer different questions.
NRR
Net revenue retention
Beginning recurring revenue adjusted for expansion, contraction and churn, divided by beginning recurring revenue.
CAC
Customer acquisition cost
Sales and marketing cost divided by the new customers attributed to the same scope and period.
LTV
Customer lifetime value
A model of expected customer value. Use margin-aware, cohort-based assumptions where possible.
The core formulas
MRR: sum of eligible recurring monthly revenue under one consistent revenue policy.
ARR: MRR × 12 when the business uses an annualized run-rate view.
Gross revenue retention: (beginning recurring revenue − contraction − churn) ÷ beginning recurring revenue.
Net revenue retention: (beginning recurring revenue + expansion − contraction − churn) ÷ beginning recurring revenue.
CAC: sales and marketing cost ÷ new customers acquired.
Simple LTV model: average revenue per account × gross margin × expected customer lifespan. Treat this as an estimate and test it against cohorts.
How the metrics work together
MRR and ARR describe scale. Churn, GRR and NRR describe retention quality. CAC describes acquisition cost, while LTV estimates the value available to recover that cost. Runway adds the cash perspective: a strong ratio does not remove the need to fund payroll, product work and acquisition before cash is collected.
Mistakes that distort decisions
- • Mixing one-time revenue into recurring revenue.
- • Comparing logo churn with revenue churn.
- • Using revenue LTV against fully loaded CAC.
- • Treating attributed revenue as incremental profit.
- • Hiding segment differences inside one average.
Calculate the next metric
Use the calculators to test assumptions, then compare modeled results with actual customer cohorts and cash movement.