SaaS glossary

The SaaS metrics
glossary.

Plain-English definitions, formulas, and benchmarks for the metrics that run a subscription business — from MRR and NRR to LTV, CAC, and the Rule of 40. Written for finance, RevOps, and growth teams.

Revenue

Monthly Recurring Revenue (MRR) Monthly Recurring Revenue (MRR) is the total predictable subscription revenue a business expects to receive ev... Annual Recurring Revenue (ARR) Annual Recurring Revenue (ARR) is the value of a company's recurring subscription revenue normalized to a one-... Average Revenue Per User (ARPU) Average Revenue Per User (ARPU), sometimes called ARPA (per account), is the average recurring revenue generat...

Growth

MRR Growth Rate MRR Growth Rate is the percentage change in Monthly Recurring Revenue from one month to the next. Net New MRR Net New MRR is the net change in Monthly Recurring Revenue in a period — new plus expansion minus contraction ... Expansion MRR Expansion MRR is the additional Monthly Recurring Revenue generated from existing customers through upgrades, ... SaaS Quick Ratio The SaaS Quick Ratio measures growth efficiency by comparing the MRR a company gains to the MRR it loses in th... Rule of 40 The Rule of 40 states that a healthy SaaS company's revenue growth rate plus its profit margin should equal or...

Retention & churn

Customer Churn Rate Customer Churn Rate is the percentage of customers who cancel or fail to renew during a given period. Revenue Churn Rate Revenue Churn Rate is the percentage of recurring revenue lost in a period from cancellations and downgrades, ... Gross Revenue Retention (GRR) Gross Revenue Retention (GRR) is the percentage of recurring revenue retained from existing customers over a p... Net Revenue Retention (NRR) Net Revenue Retention (NRR) is the percentage of recurring revenue retained from existing customers over a per... Cohort Analysis Cohort Analysis groups customers by a shared start period and tracks how a metric — usually retention or reven...

Unit economics

Customer Lifetime Value (LTV) Customer Lifetime Value (LTV) is the total gross profit a business expects to earn from a customer over the en... Customer Acquisition Cost (CAC) Customer Acquisition Cost (CAC) is the average total sales and marketing cost required to acquire one new cust... LTV to CAC Ratio (LTV:CAC) The LTV:CAC ratio compares the lifetime value of a customer to the cost of acquiring them, measuring the retur... CAC Payback Period CAC Payback Period is the number of months it takes for the gross profit from a customer to recover the cost o... Gross Margin Gross Margin is the percentage of revenue left after subtracting the direct cost of delivering the product or ... SaaS Magic Number The SaaS Magic Number measures sales-and-marketing efficiency: how much new annual recurring revenue each doll...

Financial health

Burn Rate Burn Rate is the rate at which a company spends its cash reserves, usually expressed per month. Net burn is sp... Cash Runway Cash Runway is the number of months a company can continue operating at its current net burn rate before it ru...