Metrics investors actually care about.
MRR growth without churn control is a leaky bucket. LTV:CAC below 3:1 means you are buying customers you cannot afford. Calculate all three before your next board meeting or fundraise.
What is my true monthly recurring revenue after adjustments?
What is my annualised churn and how long until it becomes critical?
Is my LTV:CAC ratio at the minimum healthy 3:1?
What is my CAC payback period in months?
How much runway do I have at my current net burn?
Is my net revenue retention above 100%?
Recommended tools
Calculators for this decision
SaaS MRR Calculator
Calculate monthly recurring revenue by plan, customers, and expansion.
Solves
True MRR from all plan types — adjusted for annual subscriptions, upgrades, downgrades, and churn.
SaaS ARR Calculator
Calculate annual recurring revenue and growth scenarios.
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Annualised recurring revenue from MRR — and ARR projection given a growth rate.
Churn Rate Calculator
Calculate customer churn, revenue churn, and retention signals.
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Monthly and annual customer churn and revenue churn — including net revenue retention.
LTV to CAC Ratio Calculator
Calculate LTV:CAC ratio and SaaS acquisition quality.
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LTV:CAC ratio and CAC payback period — the two metrics that determine unit economics health.
SaaS Runway Calculator
Calculate months of runway from cash balance and burn rate.
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Months of runway from current cash and monthly net burn — and when to start fundraising.
Net Revenue Retention Calculator
Calculate NRR from starting revenue, expansion, contraction, and churn.
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NRR from expansion, contraction, and churn — and what it means for growth efficiency.
Practical guide
The SaaS metrics that determine fundraisability
SaaS investors look at a small set of metrics to decide whether a business is fundable. At the top of the list: MRR growth rate, net revenue retention (NRR), LTV:CAC ratio, and CAC payback period. Together, these four numbers reveal whether the business can grow sustainably or whether it is growing by burning cash to acquire customers it cannot retain.
MRR (Monthly Recurring Revenue) must be calculated correctly. A common mistake is counting annual subscriptions at their full value in the month of payment. Annual subscriptions should be divided by 12 and recognised monthly. MRR = (number of subscribers × average monthly revenue) — with adjustments for expansions (upgrades, seat additions), contractions (downgrades), and churn.
Net revenue retention (NRR) is the metric that separates great SaaS businesses from good ones. NRR measures revenue from your existing customer base — including expansions and churn. NRR above 100% means existing customers are spending more over time, making growth from new customers additive. Many top SaaS businesses grow primarily through expansion revenue rather than new logo acquisition.
LTV:CAC ratio of 3:1 is the commonly cited minimum healthy ratio. Below 2:1 means you are spending nearly as much to acquire a customer as the customer is worth — which makes growth expensive and potentially unprofitable. CAC payback period under 12 months is the benchmark for capital-efficient SaaS. At 12–18 months, the business can grow but needs capital to fuel it. Above 24 months, unit economics are challenged.
Worked example
See it in action
Scenario: A B2B SaaS with 350 customers preparing for a Series A
- 1MRR calculation: 320 customers on £199/month + 30 customers on £499/month = £63,680 + £14,970 = £78,650 MRR.
- 2Annual churn: Lost 42 customers in the last 12 months = 42/350 = 12% annual customer churn. Monthly: ~1%.
- 3NRR: Expansion revenue from upgrades: £4,200/month. Revenue churn (lost MRR): £2,800/month. NRR = (£78,650 + £4,200 - £2,800) / £78,650 = 101.7%.
- 4LTV and CAC: Average revenue per account: £225/month. Gross margin: 75%. LTV = (£225 × 0.75) / (12% annual churn / 12) = £168.75 / 0.01 = £16,875. CAC: total sales and marketing spend £35,000 / 8 new customers = £4,375 CAC. LTV:CAC = 3.86:1.
- 5CAC payback: CAC £4,375 / (monthly ARPU £225 × gross margin 75%) = 4,375 / 168.75 = 25.9 months. Above the 12-month benchmark.
Result
NRR of 101.7% is good. LTV:CAC of 3.86:1 is above the 3:1 minimum. But CAC payback of 26 months is elevated — this business needs capital to grow because each customer takes over 2 years to pay back. Improving either gross margin or reducing CAC is the priority before the Series A.
Watch out
Common mistakes to avoid
Counting annual subscriptions as full MRR in the payment month rather than dividing by 12.
Calculating customer churn instead of revenue churn — they diverge significantly if high-value customers churn at different rates.
Ignoring expansion revenue in NRR — businesses with strong expansion look much better on NRR than raw churn suggests.
Using blended CAC (all channels, all costs) when claiming efficiency — and vice versa when it looks bad.
Presenting MRR growth rate without separating new logo, expansion, and reactivation — investors will ask.
Confusing ARR with annual revenue — ARR is 12 × current MRR, not last year's total bookings.
Before you decide
Decision checklist
Is MRR calculated on a monthly normalised basis (annual plans ÷ 12)?
Do you track customer churn and revenue churn separately?
Is your NRR above 100%? If below, what is driving it?
Is your LTV:CAC ratio above 3:1?
Is your CAC payback period under 18 months?
Do you have 12+ months of runway at current net burn?
Calculated your numbers? Take the next step.
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Frequently asked questions
What is the difference between MRR and ARR?
MRR is the current monthly recurring revenue — the run rate for a single month. ARR is simply MRR × 12. ARR is a convention for comparing SaaS businesses at different scales; it is not last year's total revenue. A business with £50,000 MRR has a £600,000 ARR regardless of what it billed in the last 12 calendar months.
What is a healthy churn rate for SaaS?
For SMB SaaS, monthly churn rates of 3–5% are common. For mid-market, 1–2% monthly is more typical. For enterprise, below 1% monthly (less than 10% annual) is expected. Note that 3% monthly churn compounded equals about 31% annual churn — meaning you need to replace nearly a third of your customer base each year just to hold MRR flat.
Why is NRR considered more important than gross churn?
NRR captures the full picture of what your existing customers are doing — churn, but also expansions and upgrades. A business with 15% gross revenue churn but 20% expansion revenue has NRR of 105% — it is growing from existing customers even as some leave. NRR above 100% means you can grow revenue without any new customers, which is a sign of strong product-market fit and pricing power.
What LTV:CAC ratio should I target?
3:1 is the widely cited minimum. It means the customer is worth 3× what it costs to acquire them. Below 2:1, unit economics are challenged and growth requires disproportionate capital. Above 5:1 may suggest you are under-investing in growth. The benchmark is a starting point — what matters more is CAC payback period (how long before the customer pays back the acquisition cost in gross profit terms).