4 recurring revenue metrics to start tracking
There are tons of metrics you could track, but I’ll unpack the four I think are most important to look at on a regular basis.
Monthly recurring revenue, or MRR, measures the total amount of predictable revenue that a company receives on a monthly basis. Companies track MRR for financial forecasting and planning, as well as for measuring growth and momentum. Businesses with less than $10 million ARR tend to focus more on calculating MRR.
Annual recurring revenue, or ARR, is your MRR multiplied by 12. It accounts for all recurring revenue within a year. Not calculating ARR and MRR correctly means you’re not only lying to investors and your team, but you’re miscalculating the health of your business. Tracking MRR and ARR will help you plan for the short and long term.
Average revenue per user, or ARPU, is the average amount of monthly revenue each user brings in. This metric allows you to identify trends and implement changes that can shift the trajectory of your business toward a larger pool of SaaS profits.
Lifetime value, or LTV, is the total dollar amount you’re likely to receive from an individual customer throughout the life of their account with your company. LTV shows a more complete picture than other metrics. A growing LTV means your company is doing well. A declining one indicates your company is acquiring less money from each customer and you need to act accordingly. Tracking LTV can inform decisions, such as how much you can pay to acquire a user, the effects of losing users, and how changes to a product impact the sum-total revenue you can expect to bring in from a user.