The Canonical SaaS Metric Stack
The metrics that matter for SaaS: MRR, ARR, NRR, GRR, CAC, LTV, CAC payback, burn multiple, rule of 40, quick ratio. Definitions, formulas, benchmarks, and the traps.
Revenue metrics
MRR (Monthly Recurring Revenue)
Total predictable subscription revenue normalized to a monthly cadence. Annual contracts divided by 12. Exclude one-time fees, services, and usage overages in the core MRR number; track them separately.
ARR (Annual Recurring Revenue)
MRR x 12. Preferred for enterprise-focused businesses.
NRR (Net Revenue Retention)
Revenue from the start-of-period customer cohort at end of period, divided by revenue at start of period. Includes expansion, contraction, and churn.
Formula: NRR = (Starting ARR + Expansion - Contraction - Churn) / Starting ARR
Benchmark: 100% = neutral. 110%+ = strong. 120%+ = elite.
GRR (Gross Revenue Retention)
Same as NRR but without expansion. Caps at 100%. Measures your ability to keep revenue from an existing cohort before upsell.
Acquisition metrics
CAC (Customer Acquisition Cost)
Sales and marketing spend in the period divided by new customers acquired in the same period. Blended CAC includes organic; paid CAC includes only paid.
CAC Payback Period
Months to recover a customer's acquisition cost in gross profit. Payback = CAC / (ARPA x Gross Margin).
Benchmark: Under 12 months is strong. 12-24 is acceptable. Over 24 is a problem.
LTV (Lifetime Value)
Average revenue per customer divided by customer churn rate, times gross margin. LTV has more modeling assumptions than any other metric on this page; use it directionally, not precisely.
LTV/CAC
A health ratio. Target: 3:1 or better. Below 1:1 you are losing money on acquisition.
Efficiency metrics
Burn Rate
Net monthly cash consumption (expenses minus collected revenue).
Burn Multiple
Net burn divided by net new ARR. Measures how efficiently dollars turn into growth.
Benchmarks (David Sacks): <1 amazing, 1-1.5 great, 1.5-2 good, 2-3 suspect, >3 bad.
Magic Number
Net new ARR divided by sales and marketing spend of the prior period.
Benchmark: >1 = invest more. 0.5-1 = steady. <0.5 = pull back.
Rule of 40
Revenue growth rate + operating profit margin. Target: >40%.
Quick Ratio
(New MRR + Expansion MRR) / (Churned MRR + Contraction MRR). Target: >4.
Product and engagement metrics
DAU, WAU, MAU
Unique active users in a rolling day, week, month window. Define "active" narrowly.
DAU/MAU (Stickiness)
Ratio of daily to monthly active users. 20%+ is strong for consumer. 50%+ is elite.
Activation rate
Percentage of new users who complete the defined activation event that predicts retention.
Cohort retention
Percentage of a starting user cohort still active at week N or month N. Curves that flatten are the prize.
Financial metrics
Gross Margin
(Revenue - COGS) / Revenue. SaaS benchmark: 75-85%.
Runway
Cash / Burn Rate. Months of operation remaining at current spend.
Deferred Revenue
Revenue collected but not yet recognized because the service has not been delivered.
Contracted ARR
ARR under signed contract, billed or not.
Committed ARR
Contracted ARR minus near-term churn risk.
Traps
- LTV without cohort context. A single LTV number masks wildly different behavior by acquisition cohort, plan, and channel.
- MRR with services. Including one-time revenue or implementation fees in MRR inflates the number and hides churn.
- CAC without fully-loaded costs. If your CAC does not include salaries and tooling, it is half a number.
- Point-in-time snapshots. MRR and NRR at a single point of time miss the motion. Report trailing 12 months.
- Metric stacking. More than 15 metrics on a report and the signal is lost. Pick your canonical stack and hold to it.
Frequently asked questions
What is the most important SaaS metric?
For early stage: net revenue retention. For growth stage: CAC payback period. For late stage: rule of 40. No single metric works for all stages, and any framework that claims one does is selling something.
What is a good NRR benchmark for SaaS?
Above 100% is healthy. Above 110% is strong. Above 120% is elite. Below 90% signals structural retention problems. Top-tier enterprise SaaS companies at IPO routinely post 120-140% NRR.
What does "rule of 40" mean?
Revenue growth rate plus operating profit margin should exceed 40%. It is a health ratio that trades off growth against efficiency. A company growing 60% at -15% margin passes (45%). A company growing 15% at 30% margin also passes (45%).
Is burn multiple more important than burn rate?
Yes. Burn rate tells you how much you are spending. Burn multiple tells you how efficiently you are converting burn into growth. Burn multiple under 1 is excellent. 1-2 is good. 2-3 is acceptable. Over 3 is a warning.