Plain-English definitions of the metrics that show up in every SaaS founder conversation, board deck, and investor update — with a link to the calculator for each one where we have it.
Also written: monthly recurring revenue
The predictable subscription revenue a business collects every month, normalized to a monthly figure regardless of billing cycle (an annual plan's revenue is divided by 12). MRR excludes one-time fees, setup charges, and other non-recurring revenue — it's meant to answer "if nothing changed, how much would we collect next month?"
Calculate MRR growth rate →Also written: annualized recurring revenue
MRR multiplied by 12. ARR is the figure most commonly used in fundraising conversations and valuation discussions because it's the scale investors think in, even though the underlying revenue is collected monthly (or however the actual billing cycles work).
Estimate a valuation from ARR →The percentage of customers (or revenue) lost over a period, usually a month. Customer churn counts logos lost; revenue churn counts dollars lost, which can differ a lot if the customers who leave are disproportionately small or large accounts.
Calculate churn & retention →Also written: net dollar retention (NDR)
The percentage of revenue retained from an existing customer cohort over a period, after accounting for churn, downgrades, and expansion (upsells, seat growth) — but excluding any revenue from new customers. NRR above 100% means expansion from existing customers is outpacing churn and downgrades within that same cohort.
Calculate NRR →Also written: customer lifetime value (CLV)
The total revenue (or gross profit, in more careful versions of the calculation) a business expects to collect from a customer over the entire time they stay subscribed. Usually estimated from average revenue per customer, gross margin, and churn rate rather than tracked account-by-account.
Calculate LTV →Also written: customer acquisition cost
The total sales and marketing spend divided by the number of new customers acquired over the same period. A useful CAC figure includes all of sales and marketing spend for the period, not just ad spend — salaries, tools, and content production count too.
Calculate CAC & LTV:CAC →Customer lifetime value divided by customer acquisition cost — how many dollars of value a business gets back for every dollar spent acquiring a customer. A commonly cited healthy range is 3:1 or higher, though the right target depends heavily on payback period and growth stage.
Calculate your LTV:CAC ratio →How many months it takes for the gross margin generated by a new customer to cover the cost of acquiring them. Shorter payback means cash committed to acquisition comes back faster, which matters especially for cash-constrained, bootstrapped, or early-stage companies.
Calculate CAC payback →Revenue minus the cost of delivering that revenue (hosting, support, payment processing, third-party API costs), expressed as a percentage of revenue. Healthy software gross margins typically run 70-85%+; a lower number often signals infrastructure or support costs that don't scale well with growth.
Calculate gross margin & break-even →How much cash a business spends net of revenue each month. "Gross burn" is total cash spent; "net burn" subtracts revenue collected in the same period. Net burn is the number that determines how fast the bank balance is actually falling.
Calculate burn rate & runway →How many months a business can keep operating at its current net burn rate before running out of cash — cash on hand divided by net monthly burn. Runway is one of the first numbers most investors and most founders check.
Calculate your runway →A rough health check for growth-stage SaaS companies: revenue growth rate plus profit margin (as percentages) should add up to 40 or more. It's a balance check, not a hard rule — a fast-growing, unprofitable company and a slower-growing, profitable one can both clear 40 by different routes.
Calculate your Rule of 40 score →Net burn divided by net new ARR over the same period — how many dollars of cash it took to buy one dollar of new annual recurring revenue. Lower is more efficient; under 1x is excellent, above 3x is generally considered inefficient.
Calculate your burn multiple →Also written: SaaS Magic Number
Net new ARR from this period divided by sales & marketing spend from the period before it — how many dollars of new annual recurring revenue came out for every dollar spent on S&M. Above 1.0 is excellent, 0.75-1.0 is good, below 0.5 usually means something upstream of spend (pricing, product fit, sales motion) needs fixing.
Calculate your Magic Number →Also written: ARR multiple
A company's valuation expressed as a multiple of its ARR (e.g. "6x ARR"), the most common shorthand used for early-stage SaaS valuation since profit-based multiples don't work well for companies that aren't yet profitable. The right multiple depends heavily on growth rate, net revenue retention, and gross margin, not revenue alone.
Estimate a valuation multiple →Also written: SaaS Quick Ratio
(New MRR + expansion MRR) divided by (churned MRR + contraction MRR) — a ratio of MRR gained to MRR lost that exposes churn problems a healthy-looking net new MRR number can hide. Above 4 is excellent, 2-4 is healthy, 1-2 is a warning sign, below 1 means you're shrinking.
Calculate your Quick Ratio →