Investors, acquirers, and smart operators all speak the same language: SaaS metrics. Understanding what these numbers mean and how to improve them is the difference between a business that grows and one that treads water.
MRR and ARR
MRR (Monthly Recurring Revenue) = total subscription revenue expected in a month. If you have 100 customers paying $99/month, MRR = $9,900. Simple.
ARR (Annual Recurring Revenue) = MRR × 12. It's not the same as "revenue I collected this year" — it's an annualized rate of what you'd earn if your customer base stayed constant.
Track MRR weekly. The trend matters more than the absolute number.
Churn Rate
Customer churn = customers who cancelled / total customers at start of month. 5% monthly churn = 46% of customers gone in 12 months. 2% monthly churn = 21% gone in 12 months. Below 1% is excellent for B2B SaaS.
Revenue churn tracks the $ lost, not the count — more useful because losing a $500/month customer matters more than losing a $29/month customer.
Net Revenue Retention (NRR)
NRR measures revenue from existing customers including expansions (upgrades, additional seats). NRR above 100% means your existing customer base is growing — you're generating more revenue from existing customers than you're losing to churn. This is the signal of a truly great SaaS business.
LTV and CAC
LTV (Lifetime Value) = average revenue per customer over their lifetime. Simple calculation: average monthly revenue per customer / monthly churn rate.
CAC (Customer Acquisition Cost) = total sales and marketing spend / new customers acquired.
A healthy SaaS has LTV:CAC ratio of 3:1 or better. If LTV is $1,500 and CAC is $300, you have a 5:1 ratio — excellent.
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Start on Fiverr →CAC Payback Period
How many months before you recover the cost of acquiring a customer. If CAC is $300 and they pay $99/month, payback is 3 months — excellent. If payback is 18+ months, your business is burning cash on customer acquisition that takes too long to recover. Target under 12 months.
Building a Metrics Review Cadence
Raw numbers without a review rhythm are useless. Establish a weekly metrics review where you look at MRR change, new signups, and churn for the week. Monthly, dig into NRR, CAC, and LTV trends. Quarterly, review cohort retention curves — these show you whether the product is getting better or worse at retaining users over time. Share a monthly metrics summary with your co-founder, investors, or an accountability partner. The discipline of regular review surfaces problems early, when they are still fixable.