MRR (Monthly Recurring Revenue)
MRR = Subscribers x ARPU
LTV (Customer Lifetime Value)
LTV = ARPU x Gross Margin / Monthly Churn Rate
Represents the total gross profit expected from a single customer over their entire relationship.
LTV:CAC Ratio
LTV:CAC = Customer Lifetime Value / Customer Acquisition Cost
A ratio below 1:1 means you spend more to acquire a customer than they generate. 3:1 is the widely accepted healthy target. Above 5:1 may indicate underinvestment in growth.
Net Revenue Retention (NRR)
NRR = (1 - Monthly Churn Rate + Expansion Revenue %) x 100
NRR above 100% means existing customers generate more revenue over time despite churn, a strong indicator of product-market fit.
Annual Churn Rate
Annual Churn = 1 - (1 - Monthly Churn)^12
Note: annual churn is NOT simply monthly churn x 12. A 5% monthly churn compounds to ~46% annual churn.