SaaS Metrics FAQ
MRR, ARR, churn, NRR, LTV, CAC, and every SaaS metric founders and operators need to understand.
What is MRR?
MRR (Monthly Recurring Revenue) is the predictable revenue your business earns every month from active subscriptions. It normalizes annual, quarterly, and monthly plans into one monthly figure. MRR is the most important top-line metric for SaaS companies. Track yours with the SaaS metrics calculator. Read the full MRR vs ARR guide.
What is ARR?
ARR (Annual Recurring Revenue) is your MRR multiplied by 12. It represents the annualized value of your recurring subscription revenue. ARR is the standard metric for comparing SaaS companies and is used in valuation multiples and fundraising. Learn more in the MRR vs ARR explainer.
What is the difference between MRR and ARR?
MRR measures monthly recurring revenue; ARR is MRR times 12. Use MRR for operational decisions, monthly reporting, and tracking short-term trends. Use ARR for fundraising, valuation, and annual planning. Both exclude one-time fees. Read the detailed MRR vs ARR comparison and calculate yours with the SaaS metrics calculator.
How do you calculate MRR?
Sum the monthly value of all active subscriptions. For annual plans, divide the annual price by 12. MRR components include New MRR (new customers), Expansion MRR (upgrades), Contraction MRR (downgrades), and Churned MRR (cancellations). Net New MRR equals new plus expansion minus contraction minus churned. Use the SaaS metrics calculator for instant breakdowns.
What is churn rate?
Churn rate is the percentage of customers or revenue lost over a given period. Customer churn counts how many customers cancel. Revenue churn measures the dollar value of lost subscriptions. High churn erodes your base faster than you can grow. Read the SaaS churn rate guide for reduction strategies.
What is the difference between customer churn and revenue churn?
Customer churn measures the percentage of customers who cancel, regardless of plan size. Revenue churn measures the percentage of MRR lost to cancellations and downgrades. A company can have high customer churn but low revenue churn if small accounts leave while large accounts expand. See churn benchmarks by segment.
What is a good churn rate for SaaS?
For B2B SaaS, aim for under 5% annual gross revenue churn (under 0.4% monthly). SMB-focused products typically see 3-7% monthly customer churn. Enterprise SaaS targets under 1% monthly. Net revenue churn should be negative — expansion exceeds losses. Check your numbers with the SaaS metrics calculator.
What is Net Revenue Retention (NRR)?
NRR measures the percentage of recurring revenue retained from existing customers over a period, including expansion, contraction, and churn. An NRR of 110% means your existing customer base generates 10% more revenue without new customers. It is the best indicator of product-market fit. Learn more in the churn and retention guide.
What is a good NRR?
Good NRR varies by segment: enterprise SaaS targets 120-140%+, mid-market aims for 110-130%, and SMB typically achieves 90-110%. NRR above 100% means existing customers are growing. The best public SaaS companies maintain NRR above 130%. Compare yours against SaaS benchmarks.
What is LTV (Customer Lifetime Value)?
LTV is the total revenue you expect to earn from a customer over their entire relationship with your company. It is calculated as Average Revenue Per Account divided by Churn Rate. LTV determines how much you can spend on acquisition. Read the complete guide to calculating customer LTV.
How do you calculate LTV?
The simplest formula: LTV equals ARPA (Average Revenue Per Account) divided by monthly churn rate. For example, $100 ARPA and 5% monthly churn gives an LTV of $2,000. For more accuracy, factor in gross margin. Use the LTV:CAC calculator for instant results, or read the full LTV calculation guide.
What is CAC (Customer Acquisition Cost)?
CAC is the total cost of acquiring a new customer, calculated by dividing total sales and marketing spend by new customers acquired in that period. Include salaries, ad spend, tools, and content costs. CAC pairs with LTV to evaluate growth sustainability. See CAC benchmarks for startups.
What is a good LTV:CAC ratio?
A healthy LTV:CAC ratio is 3:1 or higher — you earn three dollars for every dollar spent acquiring a customer. Below 1:1 means you lose money per customer. Above 5:1 may mean you are underinvesting in growth. Calculate yours with the LTV:CAC calculator and compare to industry benchmarks.
What is CAC payback period?
CAC payback period is the number of months it takes to recoup your customer acquisition cost through revenue. It is calculated as CAC divided by (ARPA times Gross Margin). Under 12 months is good for SaaS; longer periods require more capital. Compute yours with the CAC payback calculator.
What is the Rule of 40?
The Rule of 40 states that a healthy SaaS company's revenue growth rate plus profit margin should exceed 40%. For example, 30% growth and 15% margin equals 45%, which passes. It balances growth against profitability. Track your score with the SaaS metrics calculator and read about financial milestones by stage.
What is SaaS Quick Ratio?
SaaS Quick Ratio measures growth efficiency by dividing MRR gains (new + expansion) by MRR losses (churn + contraction). A ratio of 4 means you add $4 for every $1 lost. Above 4 is excellent, 2-4 is healthy, and below 1 means you are shrinking. Calculate it with the SaaS metrics calculator.
What is CMRR?
CMRR (Committed Monthly Recurring Revenue) is MRR adjusted for known future changes — signed contracts not yet live, pending cancellations, and confirmed upgrades or downgrades. It gives a forward-looking view of revenue, more useful for planning than backward-looking MRR. Read more about MRR components in the MRR vs ARR guide.
What is expansion revenue?
Expansion revenue is additional recurring revenue earned from existing customers through upgrades, cross-sells, add-ons, or increased usage. It is the primary driver of NRR above 100%. Strong expansion can offset churn entirely, creating negative churn. Learn strategies in the SaaS pricing strategy guide and track it with the SaaS metrics calculator.
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