Subscription and SaaS Metrics That Matter (and the Five to Track First)

We'd put more than $200,000 into my results-guaranteed marketing agency. It was growing. Clients loved the work. But every dollar of revenue was a one-off. We'd win a few projects, max out our capacity, and then the projects would end and I'd sit there wondering how I'd pay everyone.

Feast or famine.

I eventually sold that business and went looking for a model that would let me sleep at night. I found it in subscriptions.

Here's what I learned along the way. A subscription business doesn't just give you predictable revenue. It gives you predictable numbers. You can see next month coming. You can tell whether customers are staying, whether they're spending more, and what each one is worth.

But only if you measure the right things, in the right way.

This guide covers every subscription and SaaS metric that matters, the five to start with, the latest sourced benchmarks, and the mistakes that make good businesses look bad (and bad ones look good).

What are the key SaaS metrics?

Here's the full set, grouped by the question each one answers. Each links to its own page with a worked example and benchmarks.

That's 15. You don't need all of them on day one.

If you only track five metrics, track these

This is my opinionated shortlist. It works for a SaaS start-up and a suburban gym alike.

1. MRR. Your heartbeat. If it isn't rising most months, nothing else matters yet.
2. Churn (or GRR). Your leak. In Chapter 9 I called churn "one of the biggest killers of subscription businesses." Watch it monthly.
3. NRR. Your engine. Are the customers who stay spending more?
4. ARPU. Your price lever. The fastest way to grow revenue without more customers.
5. LTV:CAC (or CAC payback). Your sanity check. Are you paying more to win customers than they're worth?

In Chapter 7 I gave a similar list for checking whether land and expand is working: MRR, annual contract value, revenue growth rate, lifetime value, annual renewal rate and CAC, plus a less tangible one, "stickiness." Different names, same idea. Revenue, retention, unit economics.

Revenue metrics: MRR, ARR and ARPU

Monthly recurring revenue

MRR is the predictable subscription revenue you expect every month. You normalize every plan to a monthly figure: annual price ÷ 12, weekly price × 52 ÷ 12.

MRR = Sum of each active subscriber's monthly recurring charge

Leave out one-off fees, unpredictable usage, GST and free trials. Then track the five movements every month:

Net new MRR = New + Expansion + Reactivation − Contraction − Churn

I learned the importance of "recurring" the hard way. As a telecoms sales manager, I watched a government client's bill explode during an election month, then fall off a cliff. Great revenue. Not recurring.

Annual recurring revenue

ARR is MRR × 12, or the annualized value of your recurring contracts. It's the number buyers and investors talk in.

Be careful with 2026's ARR headlines. Our research into the companies that crossed roughly $100 million ARR this year found most milestones were self-reported run rates, and at least one (Arena) said outright its revenue was consumption-based and "not recurring."

Average revenue per user

ARPU is MRR divided by paying customers. It's the bridge between your price and your growth.

In Chapter 3 I shared Jason Lemkin's math: at $10 a month you need about a million subscribers to reach $120 million a year. Double the price and you need half the customers. Xero is a live example. In FY2026 its subscribers grew 11 percent but average revenue per customer grew 23 percent.

Retention metrics: churn, GRR, NRR and expansion

This is where subscription businesses are won and lost.

Churn rate

Churn is the share of customers (logo churn) or revenue (revenue churn) you lose in a period. Always say which you mean. Ten small customers leaving can be a disaster for logo churn and a rounding error for revenue churn.

Gross revenue retention

GRR is the revenue you keep from existing customers after downgrades and cancellations, ignoring upgrades. It can't exceed 100 percent.

SaaS Capital's 2025 survey of more than 1,000 private B2B SaaS companies found a median GRR of 91 percent, and said you need at least 90 percent to have "a shot at performance parity with your peers."

Net revenue retention

NRR starts with GRR and adds expansion revenue. Above 100 percent means existing customers are growing revenue on their own. The 2025 SaaS Capital median was 101 percent.

This is the metric I called "the miracle of net dollar retention" in Chapter 4. And it's the one most closely tied to growth:

Benchmarks vary enormously by price point and segment. ChartMogul's 2025 billing data put the B2B SaaS median at 82 percent and consumer SaaS at 49 percent. The full picture is on the NRR benchmarks page.

Expansion revenue and net negative churn

Expansion revenue is the extra money existing customers add through upgrades, add-ons, seats, usage and price rises. When it outweighs churn and downgrades, you have net negative churn, the goal I set in Chapter 9.

NRR − GRR = Expansion ÷ Starting revenue

That gap is your expansion rate. In ChartMogul's 2023 report, 37.1 percent of new ARR at companies with $15 million to $30 million in ARR came from expansion.

Unit economics: LTV, CAC, payback and gross margin

Revenue and retention tell you whether you're growing. Unit economics tell you whether growth is making you money.

Lifetime value and acquisition cost

LTV = ARPU × Gross margin % ÷ Monthly churn rate

CAC = Total sales and marketing spend ÷ New customers acquired

In Chapter 7 I suggested you want CAC to be a third or less of LTV. That's an LTV:CAC ratio of 3:1 or better.

CAC payback

CAC payback (months) = CAC ÷ (ARPU × Gross margin %)

Bessemer's portfolio data (2010 to 2021) suggested targets of under 12 months for SMB-focused companies, under 18 for mid-market and under 24 for enterprise. A gym or cafe should aim for far faster, because consumer subscribers churn faster.

Gross margin

Gross margin is what's left of each dollar after the direct cost of delivering it. It matters more in 2026 than it has for a decade, because AI changed the cost of delivery.

Traditional SaaS has long run on high software margins. AI products don't. ICONIQ's 2026 State of AI report, as summarized by SaaStr, put the average AI-product gross margin at 45 percent in 2025, projected to reach 53 percent in 2026. Bessemer found its fastest-growing AI "Supernovas" averaged about 25 percent, "often negative."

If you sell anything with AI inside, model it before you price it.

Efficiency metrics: Rule of 40 and burn multiple

These matter mainly if you've raised money or plan to.

• Rule of 40: revenue growth rate plus profit margin should be 40 or more. A business growing 30 percent with a 10 percent margin scores 40.
• Burn multiple: net cash burned divided by net new ARR. It tells you how many dollars you spend to add a dollar of recurring revenue. Lower is better.

A bootstrapped cafe club doesn't need either. A venture-backed SaaS company will be asked for both.

Funnel metrics: free-to-paid conversion

If you run freemium or free trials, track how many free users become paying ones. In Chapter 3 I noted that the average freemium conversion rate sits between 2 and 5 percent, which is why freemium needs a big addressable market.

How the metrics fit together

Metrics aren't a list. They're a chain.

• Price sets ARPU.
• ARPU × customers gives MRR, and MRR × 12 gives ARR.
• Churn and expansion determine GRR and NRR.
• ARPU, gross margin and churn determine LTV.
• LTV ÷ CAC tells you whether growth is profitable.
• NRR, growth and margin drive valuation.

Pull any lever and the others move. Raise prices and ARPU rises, LTV rises, payback shortens, but churn may tick up. Cut churn and LTV rises, NRR rises, and every acquisition dollar works harder.

This is why I'd rather see five metrics tracked honestly every month than 30 tracked occasionally.

The 2026 benchmark cheat sheet

Every figure here is sourced and dated. For the full compiled set, see the subscription benchmarks page.

Which metrics matter for a gym, a cafe or an accounting firm?

Most metric guides are written for venture-backed software companies. Most subscription businesses aren't. Here's how I'd adapt them.

The gym's "frozen membership" trap deserves a mention. In Chapter 1 I noted that about 80 percent of people who sign up for a gym membership cancel within six months. If you let members freeze instead of cancel, that's fine, but count frozen members separately or your churn rate will lie to you.

Seven mistakes that break subscription metrics

1. Including GST. In Australia, GST is collected for the ATO. It adds 10 percent to every revenue figure if you leave it in.
2. Counting one-off fees as recurring. Joining fees, setup fees and hardware make MRR look bigger than it is.
3. Counting free users. Trials and free tiers have an ARPU of zero. Keep them out of revenue metrics and track them in your funnel.
4. Mixing periods. A monthly churn rate compared with an annual benchmark is meaningless. A monthly NRR of 101 percent compounds to about 112.7 percent a year.
5. Counting the full price of an upgrade. A customer moving from $20 to $50 is $30 of expansion.
6. Averaging away the story. Blended metrics hide segments. Split by plan, customer size and billing period.
7. Confusing MRR with cash and revenue. Annual prepayments bring cash in early. Under AASB 15, that revenue is recognized over the term. Three numbers, three purposes.

How to build a metrics dashboard in an afternoon

In Chapter 9 I told the story of Box, the cloud storage company. It was using Salesforce to identify "churn events," but struggled to measure whether its fixes were working. It brought in dashboards that showed product adoption, usage and, crucially, which top clients were at risk of not renewing in the next 90 days.

You don't need enterprise software to do the same.

1. Export your customer list. One row per customer: start date, plan, monthly price excluding GST, status, cancellation date.
2. Calculate the five core metrics. MRR, churn, NRR, ARPU and LTV:CAC. Our free calculators do each one, or the Stripe Export Analyser does several at once.
3. Pick one leading indicator. Something that predicts churn before it happens: logins, visits, redemptions, support tickets.
4. Set a monthly review. Same day, same metrics, same definitions.
5. Write the definitions down. What counts as churned, when a past-due card becomes a cancellation, how you treat pauses. Consistency beats precision.

Why metrics matter when you come to sell

Recurring revenue is valuable because it's predictable. Metrics are how a buyer checks that prediction.

When a buyer or investor looks at a subscription business, they're usually asking four questions. How much recurring revenue is there? Is it growing? Will it stay? Does each customer make money? That's ARR, growth, retention and unit economics.

Clean, consistently defined metrics make that conversation easier, and they're far cheaper to set up now than to reconstruct during due diligence.

Free Subscription Profit Review

Australian business owners can book a free 30-minute review with a BPAG Accountants adviser. An honest conversation about:

• whether a subscription model could work for your business
• how recurring revenue could cover your fixed costs each month
• how it could lift what your business is worth

Book my free review Call 1300 272 422

No cost, no obligation. General information only until we understand your situation.

What to do next

1. Pick your five metrics from the shortlist above.
2. Calculate this month's numbers. Start with MRR and net revenue retention.
3. Compare them with the benchmarks for your segment, not someone else's.
4. Choose one metric to improve this quarter. If churn is high, start there. If churn is fine, work on expansion and ARPU.
5. Review monthly. Write down what changed and why.

The goal isn't a beautiful dashboard. It's never again sitting there wondering how you'll pay everyone next month.

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Robert Coorey, MBA

Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.