• Asks how to calculate MRR, ARR, churn, LTV, CAC, or payback period
• Needs to build a cohort retention table from subscription data
• Wants to prepare a board deck or investor update with SaaS metrics
• Asks about net revenue retention (NRR) or gross revenue retention (GRR)
• Needs to break down MRR movements (new, expansion, contraction, churned)
• Wants to model LTV:CAC ratio or unit economics for a pricing change
• Needs to compute quick ratio or growth efficiency metrics
• Asks about SaaS benchmarks or how their metrics compare to industry standards

• General accounting or GAAP revenue recognition - use a finance/accounting skill
• Product analytics (funnels, activation, feature usage) - use a product-analytics skill

1. MRR is the atomic unit - Every SaaS metric derives from Monthly Recurring Revenue. Get MRR calculation right first - it must exclude one-time fees, professional services, and usage overages. All other metrics (ARR, churn, LTV, NRR) build on top of a clean MRR number.
2. Churn compounds relentlessly - A 3% monthly churn rate sounds small but means losing 31% of customers annually. Always annualize churn when communicating to stakeholders, and always separate logo churn (customer count) from revenue churn (dollar amount) - they tell different stories.
3. Cohort over aggregate - Aggregate metrics hide trends. A stable overall churn rate can mask worsening retention in recent cohorts offset by strong early cohorts. Always build cohort views before drawing conclusions about retention or expansion.
4. Unit economics must be fully loaded - CAC must include all sales and marketing spend (salaries, tools, ads, content, events), not just ad spend. LTV must use gross margin, not revenue. Partial calculations give false confidence.
5. Board metrics need context, not just numbers - A number without a trend, benchmark, or explanation is noise. Every board metric should show: current value, period-over-period change, trailing trend (3-6 months), and a one-line narrative explaining why.

MRR = SUM(monthly_subscription_values for all active customers)
ARR = MRR * 12

New MRR         = MRR from customers acquired this month
Expansion MRR   = MRR increase from existing customers (upgrades, seat adds)
Contraction MRR = MRR decrease from existing customers (downgrades)
Churned MRR     = MRR lost from customers who cancelled
Net New MRR     = New + Expansion - Contraction - Churned
Ending MRR      = Starting MRR + Net New MRR

Always reconcile: Starting MRR + Net New MRR must equal Ending MRR. If it doesn't, there's a data issue (usually mid-month plan changes or proration).

Monthly Logo Churn = Customers lost this month / Customers at start of month
Annual Logo Churn  = 1 - (1 - Monthly Logo Churn)^12

Monthly Revenue Churn = (Contraction MRR + Churned MRR) / Starting MRR

Net Revenue Churn = (Contraction + Churned - Expansion) / Starting MRR

Never use ending-period denominators for churn. Use start-of-period or average-period customer/revenue counts. Ending-period denominators systematically understate churn because they exclude the customers who left.

CAC = Total Sales & Marketing Spend / New Customers Acquired
     (over the same period, typically monthly or quarterly)

LTV = ARPA * Gross Margin % / Monthly Revenue Churn Rate

Where:
  ARPA = Average Revenue Per Account (MRR / active customers)

LTV:CAC Ratio    = LTV / CAC
CAC Payback (mo) = CAC / (ARPA * Gross Margin %)

The simple LTV formula assumes constant churn and no expansion. For businesses with strong NRR (>110%), use cohort-based LTV instead: sum the actual cumulative gross profit per cohort over 24-36 months.

              Month 0   Month 1   Month 2   Month 3   ...
Jan 2025      100%      88%       82%       78%
Feb 2025      100%      85%       79%       -
Mar 2025      100%      90%       -         -

1. Assign each customer a cohort based on their signup month
2. For each cohort, count active customers (or sum MRR) at each month-end
3. Divide each cell by the Month 0 value to get retention percentage
4. Read across rows for individual cohort trajectories
5. Read down columns to compare cohort quality over time

• Same structure but cells contain MRR rather than customer count
• Cells can exceed 100% if expansion outpaces churn (shows NRR by cohort)

The most common mistake is using calendar months instead of relative months. Month 1 means "one month after signup", not "the next calendar month." A customer who signs up Jan 28 and is measured Feb 1 has not completed Month 1.

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

Annual NRR = MRR from customers who were active 12 months ago / Their MRR 12 months ago

NRR above 100% means the business grows even with zero new customers. Median NRR for public SaaS companies is approximately 110-115%. Top quartile exceeds 125%.

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

• Quick Ratio > 4: Very efficient growth (adding $4 for every $1 lost)
• Quick Ratio 2-4: Healthy growth
• Quick Ratio < 2: Leaky bucket - churn is undermining growth efforts

Quick Ratio is most useful for early/mid-stage companies. At scale, absolute NRR and net new MRR matter more than the ratio.

| Metric              | Current  | MoM Change | QoQ Change | Target |
|---------------------|----------|------------|------------|--------|
| ARR                 | $4.2M    | +3.1%      | +9.8%      | $4.5M  |
| Net New MRR         | $38K     | +12%       | +22%       | $35K   |
| Logo Churn (mo)     | 2.1%     | -0.3pp     | -0.8pp     | <2.5%  |
| NRR (trailing 12mo) | 118%     | +2pp       | +5pp       | >115%  |
| CAC Payback (mo)    | 14       | -1         | -3         | <18    |
| Customers           | 312      | +18        | +48        | 330    |

Always use the same metric definitions across board decks. Define each metric in a glossary appendix slide so board members share a common language. Change in methodology mid-stream destroys trust.

references/board-reporting.md

1. Ending-period denominator used for churn calculation - Using the end-of-period customer count in the denominator systematically understates churn because churned customers are excluded from the denominator. Always use the start-of-period (or average-period) count.
2. Revenue churn calculated from revenue instead of gross margin - LTV must use gross margin, not revenue. A customer paying $1000/month with 60% gross margin has half the LTV of the raw revenue number. Using revenue LTV overstates CAC payback attractiveness.
3. MRR including one-time or non-recurring charges - Professional services revenue, setup fees, and annual true-ups included in MRR inflate the number and create a misleading growth signal. MRR must contain only normalized recurring subscription revenue. Audit your MRR data source definition before reporting.
4. Cohort table using calendar months instead of relative months - Month 1 means "one month after signup," not "the next calendar month." A customer who signs up January 28 and is measured February 1 has not completed Month 1. Calendar-based cohort tables produce meaningless curves for businesses with mid-month signups.
5. Board metrics changed mid-stream without restating historicals - Changing the definition of a metric between board meetings (e.g., how churn is calculated) makes trend comparisons meaningless and erodes investor trust. Always lock definitions in a glossary. If methodology must change, restate at least 12 months of historicals.

references/

• references/metric-formulas.md

  - Complete formula reference for all SaaS metrics with edge cases, pro-rata handling, and multi-currency considerations. Load when calculating specific metrics from raw data.

• references/cohort-analysis.md

  - Step-by-step cohort table construction, visualization techniques, revenue vs. logo cohorts, and interpreting cohort curves. Load when building or analyzing cohort data.

• references/board-reporting.md

  - Full board deck template, chart specs, narrative frameworks, benchmark tables, and investor FAQ responses. Load when preparing a board deck or investor update.

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