SaaS and startup metrics explained
Investors use these to judge growth, what a customer is worth and how dependable your revenue is. This section explains 18 of them in plain English. Jump to the calculator to try it with your own numbers.
Section 3 of 10
18 terms explained
Revenue
What the business earns from sales in a period, before any costs. UK accounts call it turnover, and it excludes VAT.
MRR
Monthly recurring revenue
Revenue you can expect every month from subscriptions or contracts, leaving out one-off fees.
ARR
Annual recurring revenue
Recurring revenue for a year, usually MRR × 12. It is not the same as total annual sales, which include one-off revenue.
GMV
Gross merchandise value
The total value of everything sold through a marketplace in a period. The marketplace's own revenue is its cut of that, not the whole GMV.
ARPU
Average revenue per user
Revenue in a period divided by the number of users in that period.
CAC
Customer acquisition cost
The average cost of winning one new customer: sales and marketing spend divided by the number of new customers.
LTV
Lifetime value (also CLTV, customer lifetime value)
What a customer is worth to you over the whole relationship, worked out with a stated method, such as monthly gross profit per customer divided by monthly churn.
LTV:CAC
Lifetime value to acquisition cost ratio
Lifetime value divided by acquisition cost. Below 1:1, each customer costs more to win than they bring in.
Churn
The share of customers, or recurring revenue, you lose in a period. Monthly churn of 3% means losing 3 in every 100 customers each month.
NRR
Net revenue retention
Recurring revenue kept from existing customers over a period, after upgrades, downgrades and churn. Above 100% means existing customers are spending more in total.
GRR
Gross revenue retention
Like NRR but without upgrades, so it can never go above 100%. It shows how much revenue you keep before any growth from existing customers.
AOV
Average order value
Total order revenue divided by the number of orders.
GM
Gross margin
Revenue minus the direct cost of delivering it, as a percentage of revenue.
EBITDA
Earnings before interest, taxes, depreciation and amortisation
A rough measure of operating profit before financing costs, tax and accounting charges for the wear on assets.
ROI
Return on investment
The profit from an investment compared with what it cost, usually as a percentage.
YoY
Year over year
Compared with the same period last year, which takes out seasonal swings.
MoM
Month over month
Compared with the month before.
QoQ
Quarter over quarter
Compared with the quarter before.
Try it with your numbers
SaaS metrics calculator
Put in one month of numbers and get MRR, ARR, ARPU, churn, NRR, GRR, CAC, LTV, LTV:CAC and CAC payback, with how each is worked out. It starts on the example above.
Annual recurring revenue
£120,000
MRR of £10,000 at the end of the month, up 0.0% on the start
- LTV:CAC
- 5:1
- CAC payback
- 6.7 months
- Net revenue retention
- 97.0%
- this month
- Customers
- 200
- 3.0% churn
All metrics, and how each is worked out
| Metric | Value | How |
|---|---|---|
| MRR at the end of the monthStart MRR + new + expansion − contraction − churned | £10,000 | Start MRR + new + expansion − contraction − churned |
| ARRMRR × 12 | £120,000 | MRR × 12 |
| MRR growthChange in MRR ÷ start MRR | 0.0% | Change in MRR ÷ start MRR |
| ARPUMRR ÷ customers at the end of the month | £50.00 | MRR ÷ customers at the end of the month |
| Customer churnCustomers lost ÷ customers at the start | 3.0% | Customers lost ÷ customers at the start |
| Revenue churn(Churned + contraction MRR) ÷ start MRR | 4.0% | (Churned + contraction MRR) ÷ start MRR |
| Net revenue retention (NRR)(Start + expansion − contraction − churned) ÷ start MRR | 97.0% | (Start + expansion − contraction − churned) ÷ start MRR |
| Gross revenue retention (GRR)(Start − contraction − churned) ÷ start MRR | 96.0% | (Start − contraction − churned) ÷ start MRR |
| CACSales and marketing spend ÷ new customers | £200.00 | Sales and marketing spend ÷ new customers |
| Lifetime value (LTV)ARPU × gross margin ÷ customer churn | £1,000 | ARPU × gross margin ÷ customer churn |
| LTV:CACLTV ÷ CAC | 5:1 | LTV ÷ CAC |
| CAC paybackCAC ÷ (ARPU × gross margin) | 6.7 months | CAC ÷ (ARPU × gross margin) |
Retention figures here are for one month. Investors often ask for NRR over 12 months, which compounds the monthly figure.
Last checked . Estimates only, not financial, tax or legal advice: deal terms vary, so check your documents and take advice before you sign. More terms in the startup glossary.