The SaaS metrics glossary.
Definitions, formulas, worked examples and benchmarks for the numbers boards and investors ask about, written for founders, not accountants.
Revenue
ARRAnnual recurring revenueThe annualized value of recurring subscription revenue at a point in time: MRR times 12.MRRMonthly recurring revenueThe recurring subscription revenue you expect every month, normalized to a monthly amount.MRR movementsMRR bridgeA walk from starting to ending MRR that shows new, expansion, contraction, churn and reactivation separately.ARPAAverage revenue per accountAverage recurring revenue per customer account, usually monthly.Bookings, billings, revenueBookings vs. billings vs. revenueBookings are contracts signed, billings are invoices sent, revenue is service delivered. They move at different times.
Retention
NRRNet revenue retentionRevenue kept from an existing group of customers over a period, including expansion, as a percentage of where it started.GRRGross revenue retentionRevenue kept from an existing group of customers over a period, excluding expansion. It can never exceed 100%.Customer churn rateLogo churnThe share of customers who cancel in a period, counted by customer rather than by revenue.MRR churnRevenue churnRecurring revenue lost to cancellations (and, in gross terms, downgrades) in a period, as a share of starting MRR.CohortsCohort analysisTracking groups of customers who started in the same period to see how their revenue and retention change over time.
Efficiency
CACCustomer acquisition costThe sales and marketing cost to win one new customer.CAC paybackCAC payback periodThe months of gross profit from a new customer it takes to recover what you spent to acquire them.LTV:CACLTV to CAC ratioLifetime gross profit from a customer divided by the cost to acquire them.Burn multipleBurn multipleNet cash burned for each dollar of net new ARR. Lower is more efficient.Quick ratioSaaS quick ratioMRR gained divided by MRR lost in a period: a measure of growth efficiency.Rule of 40Rule of 40Revenue growth rate plus profit margin should total at least 40%.Gross marginSaaS gross marginThe share of revenue left after the direct cost of delivering the product.
Cash
Gross and net burnBurn rateHow much cash a company spends each month. Gross burn is total spend; net burn is spend minus cash coming in.RunwayCash runwayHow many months the company can operate before cash runs out at the current net burn.Unearned revenueDeferred revenueCash collected or invoiced for service not yet delivered. A liability that becomes revenue over time.
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Thirty minutes. Bring your last board deck or your messiest spreadsheet. You’ll leave with three things to fix, whether we work together or not.