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LIBRARY

Glossary

Definitions, formulas, and 2025 benchmarks for the essential financial metrics every SaaS and fintech operator must track. We cut the jargon and focus on how these numbers are actually calculated for the board.

A

ARR = (Monthly Recurring Revenue × 12) or (Total Contract Value / Term in Years)

A forward-looking metric that annualizes the recurring revenue of a subscription business, normalizing contract lengths to a 12-month period.

ARPA = Total MRR / Total Active Customers

The average amount of recurring revenue generated per active customer account, typically measured monthly or annually.

B

Burn Multiple
Efficiency
Burn Multiple = Net Cash Burn in Period / Net New ARR in Period

A metric that measures how much cash a startup burns to generate each net new dollar of Annual Recurring Revenue.

C

CAC Payback (Months) = CAC / (MRR per Customer × Gross Margin %)

The number of months it takes for the gross margin generated by a new customer to cover the cost of acquiring them.

Cash Runway
Operations
Runway (Months) = Current Cash Balance / Average Monthly Net Cash Burn

The number of months a company can continue operating before it exhausts its cash reserves, assuming current burn rates.

CAC = (Total Sales & Marketing Expense in Period) / (New Customers Acquired in Period)

The fully loaded total sales and marketing cost required to acquire a single new customer.

E

Expansion MRR = MRR from existing customers at end of period - MRR from those same customers at start of period

Additional recurring revenue generated from existing customers through upselling, cross-selling, or increased usage.

G

Gross Margin
Profitability
Gross Margin % = (Total Revenue - COGS) / Total Revenue

The percentage of revenue remaining after deducting the direct costs of delivering the software or service (Cost of Goods Sold).

GRR = (Starting ARR - Contraction ARR - Churned ARR) / Starting ARR

The percentage of recurring revenue retained from existing customers, excluding any benefit from expansion or cross-sells.

L

LTV = (ARPA × Gross Margin %) / Gross Logo Churn Rate

The estimated total gross profit a customer will generate over their entire relationship with the company.

Logo Churn
Retention
Logo Churn Rate = (Lost Customers during period) / (Total Customers at start of period)

The percentage of total customers (logos) that cancel their subscription during a given period.

LTV:CAC Ratio
Efficiency
LTV:CAC Ratio = Lifetime Value / Customer Acquisition Cost

The ratio comparing the lifetime gross profit of a customer to the cost required to acquire them.

M

MRR = Total active subscriptions × Monthly recurring price per subscription

The predictable total of all recurring subscription revenue normalized into a monthly amount.

N

Net New ARR = New Logo ARR + Expansion ARR - Contraction ARR - Churned ARR

The total amount of new Annual Recurring Revenue added during a period, accounting for new sales, expansion, contraction, and churn.

NRR = (Starting ARR + Expansion ARR - Contraction ARR - Churned ARR) / Starting ARR

The percentage of recurring revenue retained from existing customers over a given period, including expansion, downgrades, and churn.

R

Revenue Churn
Retention
Gross Revenue Churn = (Churned MRR + Contraction MRR) / Starting MRR

The percentage of recurring revenue lost due to cancellations and downgrades over a specific period.

Rule of 40
Valuation
Rule of 40 = Year-over-Year ARR Growth % + EBITDA Margin %

A benchmark stating that a software company's growth rate plus its profit margin should equal or exceed 40%.

S

Magic Number = ((Current Qtr GAAP Rev - Previous Qtr GAAP Rev) × 4) / Previous Qtr S&M Spend

A metric that measures sales and marketing efficiency by comparing current quarter revenue growth to previous quarter sales and marketing spend.

Quick Ratio = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)

A ratio comparing a company's revenue growth (new and expansion MRR) against its revenue losses (churn and contraction MRR).

T

TAM = Total potential customers in the market × Annual contract value (ACV)

The total global revenue opportunity available if a product achieved 100% market share.