The Core SaaS Metrics, With Formulas
| Metric | Formula | What it tells you |
|---|---|---|
| ARR | Monthly recurring revenue x 12 | Size of the recurring business |
| Net new ARR | New + expansion minus contraction minus churn | Growth this period |
| Net revenue retention | (Start ARR + expansion minus contraction minus churn) / start ARR, same cohort | Whether existing customers grow |
| Gross revenue retention | (Start ARR minus contraction minus churn) / start ARR | How much revenue you keep |
| Gross margin | (Revenue minus cost of revenue) / revenue | Cost to deliver the product |
| CAC payback | S&M spend / (net new ARR x gross margin), in months | Speed of earning back acquisition cost |
| Burn multiple | Net burn / net new ARR | Capital efficiency of growth |
Common Mistakes
ARR that is not recurring
Implementation fees, one-off services and usage spikes inflate ARR. Exclude them or report them separately.
Cost of revenue left incomplete
Hosting alone is not cost of revenue. Support, onboarding and third-party software used to deliver the product belong there too.
Definitions that drift
If churn is calculated one way in the board deck and another way in the model, investors notice in diligence. Write definitions down once and reuse them. Revenue timing also has to follow proper SaaS revenue recognition.
How to Start
Download our free SaaS metrics dashboard template, connect it to a clean month-end close, and review it monthly. Burn multiple links directly to burn rate, so track them side by side. If you want this built and maintained for you, our FP&A services do exactly that.
Want to see how this works in practice? Explore our fractional CFO services, see the industries we support, and read how an engagement with Finative works, from first call to monthly reporting.
Frequently Asked Questions
What are the most important SaaS metrics?
ARR, net revenue retention, gross revenue retention, gross margin, customer acquisition cost payback, churn and burn multiple are the core set most investors and boards review.
How do you calculate net revenue retention?
Take recurring revenue from a cohort of customers at the start of a period, add expansion, subtract contraction and churn from that same cohort, then divide by the starting recurring revenue.
How do you calculate CAC payback?
Divide sales and marketing spend for a period by net new ARR multiplied by gross margin, then express the result in months. It shows how long it takes to earn back the cost of acquiring customers.
What is burn multiple?
Burn multiple is net burn divided by net new ARR for the same period. It measures how much cash the company spends to add each dollar of recurring revenue.