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MRR, ARR, churn and LTV explained for SaaS founders
The recurring revenue numbers investors ask about, what they mean and how to track them from your first paying customer.
If your product earns by subscription, a few numbers tell you, and your investors, whether it is working.
The core metrics
- MRR (Monthly Recurring Revenue): total predictable revenue each month
- ARR (Annual Recurring Revenue): MRR multiplied by 12
- Churn: the share of customers or revenue lost each month
- ARPU: average revenue per user
- LTV (lifetime value): how much a customer pays over their lifetime
- CAC (customer acquisition cost): what it costs to win one customer
The rule of thumb
Healthy SaaS businesses earn several times more from a customer over their lifetime than it costs to acquire them, and keep churn low.
Build tracking in from day one
Your MVP should calculate these numbers automatically. Try the recurring revenue calculator on our MVP Studio page to see how price, growth and churn shape your ARR.
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