The key SaaS numbers

Why these numbers matter

You run a SaaS with a handful of numbers. You don't need to be a math person. You just need to know what each one tells you. The figures below are made-up examples for illustration only.

MRR and ARR

MRR (monthly recurring revenue) is what your subscriptions bring in each month.

Example: 20 customers paying $30 a month. MRR = 20 × 30 = $600.

ARR (annual recurring revenue) is your MRR over a year.

Example: $600 × 12 = $7,200 ARR.

Careful: this is revenue, not profit. You still have costs and taxes to subtract.

Churn

Churn is the share of customers who leave over a period.

Example: you start the month with 50 customers. 5 cancel. Churn = 5 ÷ 50 = 10% that month.

High churn is a leaky bucket: you keep filling it, but it keeps draining. It's often the first sign the tool isn't solving the problem well enough.

LTV

LTV (lifetime value) is how much a customer brings in on average, from signup to cancellation.

Example: a customer pays $30 a month and stays 10 months on average. LTV = 30 × 10 = $300.

CAC

CAC (customer acquisition cost) is what you spend to win one customer.

Example: you spend $200 on ads and get 4 customers. CAC = 200 ÷ 4 = $50.

The common-sense rule: your LTV should be well above your CAC. Otherwise, every new customer costs you money.

Conversion

Conversion is the share of people who move from one step to the next.

Example: 400 people visit your page and 8 subscribe. Conversion = 8 ÷ 400 = 2%.

You can track it at every step: visit, signup, trial, payment.

Key takeaways

• MRR and ARR measure recurring revenue, not profit.
• Churn shows whether customers stick around, and it's often the most revealing number.
• An LTV well above your CAC is the foundation of a SaaS that lasts.

Your action

Pick a SaaS idea, even a vague one. Make up a monthly price and a number of customers. Calculate your MRR, then your churn if 1 in 10 customers leaves each month. Write down what it teaches you. It's an exercise, not a forecast.