The core SaaS metrics fall into three groups: recurring revenue (MRR and ARR), retention (churn and net revenue retention), and unit economics (CAC, LTV, and CAC payback). Read together with the Rule of 40, they answer one question an investor cares about above all: is your growth both fast and efficient, and does it compound or leak.
Recurring revenue: MRR and ARR
Monthly Recurring Revenue (MRR) is the predictable subscription revenue you earn each month from active paying customers. It counts only recurring charges, so you exclude one-time setup fees, professional services, and anything non-repeating. Annual Recurring Revenue (ARR) is simply MRR times twelve, the same revenue viewed annually for planning and board reporting. MRR is the heartbeat metric for month-to-month operating; ARR is the lens for the bigger picture. Track how MRR moves and why: new, expansion, contraction, and churned MRR each tell a different story.
Retention: churn and net revenue retention
Growth means little if the bucket leaks. Churn measures the customers or revenue you lose in a period; high churn forces you to acquire aggressively just to stand still. The metric investors prize most is Net Revenue Retention (NRR), the percentage of revenue you keep from existing customers after churn and downgrades, with expansion added back. An NRR above 100 percent means your existing base grows on its own even before new sales, which is one of the most valuable properties a SaaS company can have. It is the line that separates a good SaaS business from a great one.
Unit economics: CAC, LTV, and the LTV:CAC ratio
Customer Acquisition Cost (CAC) is the fully loaded sales and marketing cost to win one customer. Customer Lifetime Value (LTV) is the gross profit a customer generates before they churn, which is why LTV rises when you cut churn or grow revenue per account. The relationship between them, the LTV:CAC ratio, tells you whether the economics justify the spend; a ratio above 3:1 is the common health marker, while much higher can mean you are underspending on growth. These are the same building blocks our deeper guide to unit economics, CAC and LTV works through with formulas.
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Request a quoteCAC payback and the Rule of 40
Two metrics tie efficiency together. CAC payback is the number of months of gross margin it takes to recover the cost of acquiring a customer; under 12 months is healthy, and until you reach it that customer is cash-negative. The Rule of 40says a healthy SaaS company's revenue growth rate plus its profit margin should sum to at least 40, a quick test of whether you are balancing growth against burn. A company growing 60 percent while losing 15 clears it; one growing 20 percent at break-even does not. Both connect directly to your burn rate and runway.
What good looks like: benchmarks
Targets vary by stage, but a strong profile is recognizable: durable MRR growth, low churn, NRR above 100 percent, an LTV:CAC above 3:1, and CAC payback under a year. No single number tells the story; investors read them as a set, because a great NRR can hide expensive acquisition, and a great LTV:CAC can hide slow growth. The point of tracking all of them is to see the trade-offs honestly.
How the metrics drive the model
These numbers are not a scorecard you check after the fact; they are the assumptions that build a forecast. MRR growth and churn drive the revenue line, CAC and payback drive the cash you need, and together they shape the runway. That is why a credible set of startup financial projections is built on metric assumptions rather than a flat growth percentage, and it is what our financial modeling service wires together for a raise.
