Guide to SaaS Metrics
Key Definitions and Formulas for Measuring Performance
MRR and ARR
Your monthly recurring revenue (MRR) and annual recurring revenue
(ARR) are important moving parts to track for a SaaS business, as they
are how much you make from subscription services on a monthly or
yearly basis.
To calculate MRR, multiply your average monthly subscription rate by
total number of subscribers, excluding one-time payments, metered
charges or discounts.
MRR Terms to Know
New Business MRR: Only new conversions counted
Expansion MRR: Upsold business
Contraction MRR: Down-sold business
MRR Churn: The rate of subscription loss
Reactivation MRR: Return of a previously lost subscription
Average Revenue Per Account (ARPA): Total MRR divided by
number of subscribers
Customer Churn Rate
This is the rate at which you're losing or
gaining customers:
Number of clients at the
end of period
Number of clients at
beginning of period
= Churn Rate
MRR Churn Rate
The rate at which your monthly revenue
increases or decreases:
Subscriber Lifetime Value
Average revenue per customer; helps
determine your marketing budget:
MRR at end of period
MRR at beginning of
period
= MRR Churn
Average MRR per
subscriber
Customer churn rate
= Lifetime Value
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