SaaS Company KPIs: an ultimate guide

When you live and breathe Software as a Service, terms like ARR, MRR, LTV, CAC become just part of your daily slang. Gross vs. Net MRR Churn, and how is it different from Customer Churn.

It’s a real mess. So much so that for new company employees, I sometimes do a group class on ‘understanding SaaS’ to make sure they understand the language I speak after 6 years of running a SaaS company.

Software as a service key metrics

In this article, we’ll go over,

• The basics, MRR and ARR.
• Expansion, contraction, and reactivation MRR.
• Churn Rate, and the difference between customer churn, gross revenue churn, and net revenue churn.
• Understanding negative churn rates.
• Estimating Lifetime Value.
• Cost of Acquisition, and LTV to CAC Ratio.
• Understanding Cohorts.

Let’s start with the basics.

MRR stands for Monthly Recurring Revenue. That means the number of subscriptions that you bill each month: the number of people who are subscribed to your platform and who will be billed automatically unless they…