SaaS Metrics Explained — MRR, Churn, LTV for Solo Founders

When you are a solo founder, you don't have time to track 50 metrics. You only need three: MRR, Churn, and LTV. Everything else is a distraction.

MRR — Monthly Recurring Revenue

MRR is the lifeblood of your SaaS. It tells you if your business is growing or dying.

MRR = Active Customers × Average Revenue Per User (ARPU)

What Good Looks Like

Net New MRR

Track net new MRR — not just total MRR. If net new MRR is negative, you're shrinking even if total MRR looks fine.

Net New MRR = New MRR + Expansion MRR - Churned MRR - Contraction MRR

Churn Rate

Churn is the silent killer of SaaS businesses. Even great products lose 3-5% of customers per month.

Monthly Churn Rate = (Customers Lost / Customers at Start) × 100

Healthy Benchmarks

• < 2% monthly — World class
• 2-5% monthly — Good for early stage
• 5-7% monthly — Needs attention
• > 7% monthly — Critical issue

Customer Lifetime

Your churn rate determines how long customers stay. At 2.5% monthly churn, the average customer stays 40 months. At 7%, they stay 14 months.

Average Lifetime (months) = 1 / Monthly Churn Rate

LTV — Customer Lifetime Value

LTV = ARPU × Gross Margin / Monthly Churn Rate

If your ARPU is $99, gross margin is 80%, and monthly churn is 2.5%: LTV = (99 × 0.80) / 0.025 = $3,168. Each customer is worth roughly $3,168 to you.

LTV:CAC Ratio

• 3:1+ — Healthy business
• 1:1 to 3:1 — Marginal, needs optimization
• < 1:1 — You lose money on every customer

CAC Payback Period

How long to recover what you spent acquiring a customer. Aim for under 12 months. Under 6 is excellent.

CAC Payback = CAC / (ARPU × Gross Margin)