SaaS metrics definitions

Type

Definitions and formulas

As of

October 6, 2026

Version

1.0

Sources

5

Reading time

5 min

To keep a copy, use your browser's print command and choose Save as PDF. The layout drops the navigation and lists each source address in full.

Summary

Early-stage companies are asked for the same handful of numbers by every investor, advisor and customer, and report them differently each time. The cost is not the arithmetic; it is that two reports of “churn” cannot be compared unless the definition is the same. This brief collects the published definition and formula for each metric, says where a formula is not stated by the references, and proposes a short discipline for reporting them consistently.

Every figure in this brief is a formula or a symbol. There are no benchmarks, no typical values and no targets.

Definitions and formulas

Recurring revenue: MRR and ARR

“Recurring revenue is often tracked on either a monthly basis, as monthly recurring revenue (MRR), or an annual basis, as annual recurring revenue (ARR)” (ARR entry). The entry describes MRR as the average monthly client payment multiplied by the number of clients, and one-time fees are excluded.

The entry does not give a formula converting MRR to ARR. A common convention is to multiply a monthly figure by twelve. That convention is not stated by the references used here, so it is treated as a reporting choice: say which one you use.

Customer churn

Churn rate “is a metric that measures the proportion of individuals (e.g. employees), customers, or items that leave a defined group during a specified period of time.” For customers the entry gives Churn = (L / T) x 100, where L is customers lost and T is total customers during the time period (Churn entry). The entry notes an alternative that divides by customers acquired in the period instead of total customers, which is a different metric and must be labelled as such.

Net revenue retention

“Net revenue retention (NRR) is a metric that measures a company’s ability to retain revenue from existing customers over a specific period of time.” The formula as shown is:

NRR = [(beginning recurring revenue - MRR lost from churn - MRR lost from downgrades + revenue from upgrades) / beginning recurring revenue] x 100 (Stripe)

Customer acquisition cost

“Customer acquisition cost (CAC) is the cost of persuading a customer to purchase a product or service.” The simple form is CAC = MCC / CA, marketing cost for the period divided by customers acquired in it. An extended form adds sales and marketing wages, software, professional services and overhead (CAC entry). The choice between simple and extended changes the number, so state which you use.

Customer lifetime value

LTV, or customer lifetime value (CLV), is “the net profit that a customer contributes to during the entire future relationship with a business.” The basic formula shown is CLV = Margin x (Retention / (1 + Discount - Retention)), where the discount term reflects the time value of money (CLV entry). The CAC entry notes that a ratio of lifetime value to acquisition cost is sometimes quoted as a target; this brief records that the idea exists and publishes no target, because a rule of thumb is not a benchmark.

Analysis: reporting consistently

This section is analysis by World Enterprise Editorial. It is a recommendation, not a statement of the references.

1. Fix the period. Report each metric over a stated period, and the same period each time.
2. Fix the population. Say which customers are in the denominator: all, paying only, or one cohort.
3. Separate recurring from one-time. The MRR entry excludes one-time fees; keep them out of every recurring metric.
4. State the conversion convention. If ARR is derived from MRR, write down the rule.
5. Pair the number with its formula. A reader should be able to recompute it from your inputs.
6. Never mix simple and extended CAC in one trend line. If the definition changes, restate the history.
7. Do not quote a ratio without its inputs. A ratio of two derived metrics hides both definitions.

Methodology

On 6 October 2026 the five references listed under Sources were retrieved. For each metric the quotation and formula are reproduced as returned by the retrieval tool. A formula the references do not state is marked as a convention. Symbol meanings (MCC, CA, L, T) are as read from the page summaries. Nothing in this brief is a measured value.

Limitations

• The references are one payments-company explainer and four encyclopedia entries. None is an accounting standard, and none replaces the definitions in a company’s financial reporting framework.
• The MRR to ARR conversion is not stated by the references and is a convention here.
• Symbol expansions were read from page summaries and should be confirmed against the pages.
• Other widely used references (for example Investopedia and Stripe’s MRR page) could not be retrieved, so they are not cited.
• The brief gives no benchmarks. Do not infer one from an example.

Appendix: formula table and reporting checklist

Reporting checklist, each item answered in writing for every metric you report:

1. What is the period?
2. Who is in the population?
3. Are one-time fees excluded?
4. Which formula variant is used?
5. Has the definition changed since the last report?
6. Can a reader recompute the number from the inputs given?

Sources

1. Net revenue retention (NRR), Stripe . Accessed October 6, 2026.
2. Annual recurring revenue, Wikipedia . Accessed October 6, 2026.
3. Customer acquisition cost, Wikipedia . Accessed October 6, 2026.
4. Customer lifetime value, Wikipedia . Accessed October 6, 2026.
5. Churn rate, Wikipedia . Accessed October 6, 2026.