SaaS · Metrics
The core subscription metrics, their formulas and one worked example with illustrative numbers.
Last updated: October 2026. Written by Athar Ahmad, Certified Bubble.io Developer and Tech Architect, Simple Automation Solutions.
Quick answer
The core SaaS metrics are MRR (monthly recurring revenue), ARR (MRR times 12), ARPA, customer and revenue churn, gross margin, CAC (sales and marketing spend divided by new customers), LTV (ARPA times gross margin divided by churn rate), the LTV to CAC ratio and CAC payback period. A common benchmark is an LTV to CAC ratio of about 3 or higher, though it varies by business.
Key takeaways
- MRR x 12 = ARR; churn = customers lost / customers at start.
- LTV = ARPA x gross margin / churn; CAC = spend / new customers.
- A commonly cited LTV to CAC target is around 3 or higher.
- Normalise annual plans to monthly and exclude trials from MRR.
- Build event tracking and an admin view into your app from the start.
In this guide
SaaS founders hear a stream of acronyms: MRR, ARR, churn, CAC, LTV. They matter because subscription businesses grow or die by a handful of numbers, and understanding them early tells you whether you are building a business or a hobby.
This guide explains the core SaaS metrics in plain language, gives the formulas and works through one example from start to finish. All figures in the example are illustrative.
What are the most important SaaS metrics?
| Metric | What it tells you | Formula |
|---|---|---|
| MRR (Monthly Recurring Revenue) | Predictable subscription revenue each month | Sum of monthly subscription fees |
| ARR (Annual Recurring Revenue) | The same, annualised | MRR x 12 |
| ARPA (Average Revenue Per Account) | Typical revenue per customer | MRR / number of customers |
| Customer churn rate | Share of customers lost in a period | Customers lost / customers at start of period |
| Revenue churn rate | Share of recurring revenue lost | MRR lost / MRR at start of period |
| Gross margin | How much of each dollar remains after direct costs | (Revenue – cost of serving customers) / Revenue |
| CAC (Customer Acquisition Cost) | What it costs to win a customer | Sales and marketing spend / new customers |
| LTV (Customer Lifetime Value) | Gross profit expected from a customer over their life | ARPA x gross margin / churn rate |
| LTV to CAC ratio | Whether acquisition is worth the money | LTV / CAC |
| CAC payback period | Months to recover the cost of winning a customer | CAC / (ARPA x gross margin) |
A worked example
Imagine a SaaS product with the following illustrative numbers:
| Item | Value |
|---|---|
| Customers | 100 |
| Average subscription | $50 per month |
| Gross margin | 80 percent |
| Customers lost this month | 3 |
| Sales and marketing spend this month | $2,000 |
| New customers this month | 5 |
| Metric | Calculation | Result |
|---|---|---|
| MRR | 100 x $50 | $5,000 |
| ARR | $5,000 x 12 | $60,000 |
| ARPA | $5,000 / 100 | $50 |
| Customer churn | 3 / 100 | 3 percent per month |
| CAC | $2,000 / 5 | $400 |
| LTV | $50 x 0.8 / 0.03 | about $1,333 |
| LTV to CAC | $1,333 / $400 | about 3.3 |
| CAC payback | $400 / ($50 x 0.8) | 10 months |
A commonly cited rule of thumb is an LTV to CAC ratio of around 3 or higher, with a payback period short enough that you can fund growth. Treat such benchmarks as guides, not laws. They vary by market, price level and growth stage.
Why does churn matter so much?
Churn compounds. A 3 percent monthly churn loses roughly 30 percent of customers over a year, so you must keep winning new ones just to stand still. Reducing churn often grows a business faster than adding new customers. Find out why customers leave by asking them directly when they cancel.
What other metrics are worth tracking?
- Activation rate: the share of new users who reach the first moment of real value.
- Trial-to-paid conversion: how many trials become customers.
- Net revenue retention: revenue from existing customers over time, including upgrades and losses. Above 100 percent means existing customers are growing in value.
- Expansion revenue: additional revenue from upgrades and add-ons.
- Active usage: how often customers use the core feature.
Common mistakes when measuring SaaS
- Counting free trials or one-off payments in MRR.
- Mixing monthly and annual plans without normalising to monthly.
- Ignoring gross margin when calculating LTV.
- Calculating churn on too small a sample.
- Using blended CAC that hides the cost of different channels.
- Tracking dozens of numbers and acting on none.
How do you track these in your own app?
Build measurement into the product: record key events such as sign-up, activation and cancellation, store plan and billing data clearly and create a simple admin view showing the core numbers. Your payment provider holds much of the revenue data. It is far easier to plan this at build time than to retrofit it. See how SaaS accounts are structured and our Discovery Sprint, which includes measurement in the plan.
Frequently asked questions
What is MRR?
Monthly Recurring Revenue is the predictable revenue from subscriptions in a month. Add up all monthly subscription fees, normalising annual plans to a monthly figure.
How do you calculate churn rate?
Divide the number of customers lost in a period by the number you had at the start of that period. Revenue churn does the same with recurring revenue.
What is a good LTV to CAC ratio?
A commonly cited benchmark is around 3 to 1 or better, but it varies by business model and growth stage.
How do you calculate LTV?
A simple formula is average revenue per account times gross margin, divided by the churn rate.
Which metric should an early SaaS track first?
Activation and retention, because they show whether the product delivers real value before you spend heavily on acquisition.
Building a SaaS and want measurement built in?
Email us your product idea. We will plan the metrics and admin view into the first version.
Athar Ahmad, Certified Bubble.io Developer and Tech Architect, Simple Automation Solutions
About Simple Automation Solutions (SA Solutions)
Simple Automation Solutions is a Bubble.io development studio led by Athar Ahmad, a Certified Bubble.io Developer and Tech Architect. It builds web and mobile apps, client portals and SaaS products for founder-led businesses such as law firms, accounting firms, boutique agencies and consultants. Services include a free 30-minute Idea Audit, a $345 Discovery Sprint (a Product Requirements Document delivered within 24 hours, credited toward the build) and builds starting at $3,500. Website: sasolutionspk.com.
