MRR
Monthly Recurring Revenue: The total of all your paying customers' monthly fees.
💡 In practice
This is the number most SaaS founders live by. It tells you what's coming in every month and whether that figure is climbing or slipping.
Key Startup Metrics Explained
The numbers founders and investors actually ask about, in plain terms: what each one measures and when it's the one to watch.
ARR
Annual Recurring Revenue: MRR times 12. Your yearly revenue run-rate.
💡 In practice
Investors and acquirers talk in ARR. It's the figure that drives valuation and longer-range planning.
ARPA
Average Revenue Per Account: MRR divided by your number of customers.
💡 In practice
Average revenue per account. Watch it when you're deciding whether to chase more customers or charge the ones you have more.
Gross Profit
Gross Profit: Revenue minus what it costs to deliver the product (hosting, support, payment fees).
💡 In practice
Shows whether the product itself makes money before you count salaries and rent. Software usually runs 70-90% gross margin; much lower and something's off.
LTV
Lifetime Value: Your best guess at the total profit one customer brings over the whole time they stay.
💡 In practice
Pair it with CAC. If a customer is worth $1,200 over their lifetime, you know roughly what you can afford to spend winning them.
CAC
Customer Acquisition Cost: Everything you spent on sales and marketing, divided by the number of customers it brought in.
💡 In practice
The health check is the LTV:CAC ratio. Below 1:1 you lose money on every customer; 3:1 or better is the usual target.
Monthly Churn Rate
Monthly Churn Rate: Customers you lost this month, divided by how many you had at the start of it.
💡 In practice
The leak in the bucket. When churn creeps up, the cause is usually the product, the support, or the pricing, and it's worth finding out which.
Burn Rate
Burn Rate: How much cash you spend in a month beyond what you bring in.
💡 In practice
Cash in the bank divided by burn rate is your runway, the number of months before you have to raise or turn a profit.
DAU / MAU
Daily & Monthly Active Users: How many distinct people use the product on a given day, and over a month.
💡 In practice
Divide DAU by MAU and you get stickiness. A ratio of 0.2 means the average user shows up about one day in five.
Activation Rate
Activation Rate: The share of new users who complete the one action that makes the product click for them.
💡 In practice
First you have to decide what 'activated' means for your product (sent the first invoice, imported the first list). Then this tells you how many people get there.
Retention
Retention Rate: Of the customers you had at some starting point, the percentage still paying now.
💡 In practice
The flip side of churn. Weak retention means growth just replaces the customers you're losing, and you never get ahead.
TAM
Total Addressable Market: All the revenue that would exist if every possible customer bought from someone in your category.
💡 In practice
Mostly a pitch-deck number. It's useful for sizing the opportunity, but investors have seen enough inflated TAM slides to discount it.