SaaS Metrics Explained: The Only Guide You Need

If you're building a SaaS business or pitching investors, these are the numbers that matter. No jargon, no fluff.

MRR (Monthly Recurring Revenue)

The total predictable revenue you earn every month from active subscriptions. Not one-time payments, not services - just recurring subscription revenue.

If you have 100 customers paying $50/month, your MRR is $5,000. This is the single most important number in SaaS. Everything else derives from it.

ARR (Annual Recurring Revenue)

MRR x 12. The annualized version of your monthly recurring revenue.

Investors use ARR to benchmark SaaS companies. $1M ARR is the first milestone that gets you taken seriously. $10M ARR is where things get interesting.

Churn Rate

The percentage of customers (or revenue) you lose each month.

5% monthly churn means you lose 5 out of every 100 customers each month. Sounds small until you realize that's 46% of your customer base gone in a year. Good SaaS churn is under 3% monthly. Great is under 1%.

LTV (Lifetime Value)

How much total revenue one customer generates before they churn. Formula: ARPU x Gross Margin / Monthly Churn Rate.

If your average customer pays $50/month, your gross margin is 80%, and your monthly churn is 5%, then LTV = $50 x 0.80 / 0.05 = $800.

CAC (Customer Acquisition Cost)

Total sales and marketing spend divided by the number of new customers acquired in that period.

If you spend $10,000 on marketing in a month and get 50 new customers, your CAC is $200.

LTV:CAC Ratio

The ratio of customer lifetime value to acquisition cost. The single best indicator of SaaS business health.

Below 3:1 - you're spending too much to acquire customers. Between 3:1 and 5:1 - healthy. Above 5:1 - you should be spending more on growth because you're leaving money on the table.

Net Revenue Retention (NRR)

Revenue from existing customers this month compared to what they paid last month. Includes upgrades, downgrades, and churn.

NRR above 100% means your existing customers are spending more over time (through upgrades) even after accounting for churn. The best SaaS companies have NRR of 120-140%. This means they could stop acquiring new customers entirely and still grow 20-40% per year.

Model all these metrics in one spreadsheet

Our SaaS Financial Model calculates MRR, ARR, churn, LTV, CAC, unit economics, cash flow, and a full P&L. 228 formulas. Change the assumptions, everything updates.

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