The Basics
ARR: Stands for Annual Recurring Revenue. This is the sum of all recurring revenue from active subscribers, calculated on a yearly basis.
MRR: Stands for Monthly Recurring Revenue. This is similar to ARR, but calculated on a monthly basis.
LTV: Life-Time Value is the projected worth of a customer during their entire relationship with your company. This is calculated by multiplying the average revenue generated per user each month by the average length of time they stay subscribed.
CAC: Stands for Customer Acquisition Cost. This represents the total cost to acquire a new customer, including sales and marketing expenses. To calculate CAC, divide the total cost by the number of new customers acquired in a given period.
Churn: Churn rate refers to the percentage of subscribers who cancel their subscription within a given period. This is an important metric to track as it directly impacts your revenue and customer retention.
T2D3: Not a star in the constellation, but a path to the stars - one that ambitious SaaS startups should religiously follow.
CAC Ratio: Compares the LTV to CAC to determine how quickly you are recouping your customer acquisition costs. A ratio of 3:1 or higher is generally considered healthy.
MQLs: Stands for Marketing Qualified Leads. These are leads that have been identified as potential customers based on specific criteria, such as demographics or online behavior.
Product-Market Fit: That blessed isle at which you must arrive before the real growth can commence.
LVR: Lead velocity rate assesses how fast the number of Marketing Qualified Leads (MQLs) your pipeline produces is growing.