Key Metrics
The standard measures that define revenue health — from ARR and NRR to pipeline velocity, LTV, and industry-specific KPIs. Standard definitions used by operators and investors alike.
ACV
Annual Contract Value — the average annualised revenue value of a customer contract, normalising multi-year deals to a per-year amount.
Formula
ACV = Total Contract Value ÷ Contract Length in Years. A $300K, 3-year deal: ACV = $100K. A 1-year deal's ACV equals its TCV.
ARPU
Average Revenue Per User or Account — the average monthly or annual recurring revenue generated across all active customers.
Formula
ARPU = Total MRR (or ARR) ÷ Total Number of Active Customers. Calculate monthly or annually and track the trend over time. Segment by plan tier, industry, or geography for strategic insight.
ARR
Annual Recurring Revenue — the annualised value of all active subscription contracts, normalised to a 12-month period.
Formula
Sum of all active subscription MRR × 12. Or: (New ARR + Expansion ARR + Reactivation ARR) − (Churned ARR + Contracted ARR).
Bill Rate Margin
For staffing and consulting businesses, the spread between the rate charged to clients (bill rate) and the fully loaded cost of the resource doing the work — expressed as a percentage or dollar margin.
Formula
Bill Rate Margin % = (Bill Rate − Fully Loaded Cost Rate) ÷ Bill Rate × 100. Fully loaded cost includes base salary, benefits, employer taxes, and overhead allocation.
Burn Multiple
A capital efficiency metric measuring how much cash is burned for each dollar of net new ARR generated during a period.
Formula
Burn Multiple = Net Cash Burned in Period ÷ Net New ARR Added in Period. Benchmarks: <1x is excellent, 1-1.5x is good, 1.5-2x is acceptable, >2x requires explanation to investors.
CAC
Customer Acquisition Cost — the total sales and marketing spend required to acquire one new customer, including headcount, tools, programmes, and all associated overhead.
Formula
CAC = Total Sales & Marketing Spend in Period ÷ Number of New Customers Acquired in Period. Blended CAC includes all S&M spend; segmented CAC can be calculated by channel, segment, or market motion.
CAC Payback Period
The number of months it takes for a new customer to generate enough gross profit to recover the cost of acquiring them — a measure of capital efficiency in growth.
Formula
CAC Payback Period = CAC ÷ (MRR × Gross Margin %). Result in months. Example: $12,000 CAC on a $500 MRR customer at 80% gross margin = 30-month payback.
Churn Rate
The percentage of customers or revenue lost in a given period due to cancellations, non-renewals, or downgrades — the core measure of customer retention failure.
Formula
Customer Churn Rate = Customers Lost in Period ÷ Customers at Start of Period × 100. Revenue Churn Rate = MRR Lost (ex expansion) ÷ Beginning MRR × 100.
Customer Health Score
A composite score (typically 0-100 or colour-coded Red/Yellow/Green) that aggregates multiple signals (product usage, support tickets, NPS, engagement, contract value) to represent the overall health of a customer account.
Formula
Health Score = Σ(Signal Score × Weight) for each component. Example weighting: usage 40%, NPS 25%, engagement 20%, support sentiment 15%. Defined thresholds determine Red (<40), Yellow (40-70), Green (>70) status.
DAU/MAU
Daily Active Users divided by Monthly Active Users — a ratio measuring the stickiness of a product by showing how frequently monthly users return on a daily basis.
Formula
DAU/MAU = Average Daily Active Users ÷ Monthly Active Users. A ratio of 0.5 means the average monthly user returns every other day. Define 'active' by a meaningful product action beyond a login.
Deal Slippage Rate
The percentage of opportunities forecasted to close in a given period that instead push to a future period — a measure of forecast accuracy and sales execution discipline.
Formula
Deal Slippage Rate = Deals That Slipped Out of Forecast Period ÷ Total Deals Forecasted to Close in That Period × 100. Track both by count and by ACV.
EBITDA Margin
Earnings Before Interest, Taxes, Depreciation, and Amortisation as a percentage of revenue — a measure of operating profitability before capital structure and non-cash accounting adjustments.
Formula
EBITDA Margin = EBITDA ÷ Total Revenue × 100. EBITDA = Net Income + Interest Expense + Income Taxes + Depreciation + Amortisation.
GDR
Gross Dollar Retention (Gross Revenue Retention / GRR) — measures the percentage of beginning-period recurring revenue retained from existing customers, excluding any expansion revenue.
Formula
GDR = (Beginning MRR − Churned MRR − Contraction MRR) ÷ Beginning MRR × 100. GDR cannot exceed 100%. A GDR of 85% means 15% of revenue is being lost before any expansion.
GMV
Gross Merchandise Value — the total dollar value of all transactions processed through a marketplace or platform in a period, before the platform's commission or fee is deducted.
Formula
GMV = Total Value of All Transactions Processed on the Platform in a Period. Revenue = GMV × Take Rate. Disclosed by most marketplace companies as a primary growth metric.
Gross Margin
The percentage of revenue remaining after subtracting the direct cost of goods sold (COGS) — for SaaS, COGS includes hosting, support, and customer success costs attributed to delivering the service.
Formula
Gross Margin % = (Revenue − COGS) ÷ Revenue × 100. COGS for SaaS includes hosting/infrastructure, third-party licence costs, and direct CS/support team costs.
Lead Velocity Rate
The month-over-month percentage growth in the number of qualified leads generated — a leading indicator of future revenue growth that reflects current market traction momentum.
Formula
LVR = (Qualified Leads This Month − Qualified Leads Last Month) ÷ Qualified Leads Last Month × 100. Measure monthly and track as a rolling 3-month average to smooth seasonal variation.
Loss Ratio
For insurance companies, the ratio of claims paid plus loss adjustment expenses to premiums earned during a period — the fundamental measure of underwriting profitability.
Formula
Loss Ratio = (Claims Paid + Loss Adjustment Expenses) ÷ Earned Premium × 100. Combined Ratio = Loss Ratio + Expense Ratio. A combined ratio below 100% indicates underwriting profitability.
LTV
Customer Lifetime Value (CLV) — the predicted total revenue a customer generates over the entire duration of their relationship with the business.
Formula
LTV = Average Revenue per Customer ÷ Churn Rate. For subscription: LTV = ARPU × Gross Margin % ÷ Monthly Churn Rate.
Magic Number
A sales efficiency metric measuring how much annualised recurring revenue is generated for every dollar invested in sales and marketing in the prior quarter.
Formula
Magic Number = (Current Quarter ARR − Prior Quarter ARR) × 4 ÷ Prior Quarter S&M Spend. The ×4 annualises the quarterly ARR increment.
MQL-to-SQL Rate
The percentage of Marketing Qualified Leads (MQLs) that sales accepts and converts into Sales Qualified Leads (SQLs) — the primary measure of marketing-to-sales handoff quality.
Formula
MQL-to-SQL Rate = SQLs Created from MQL Source ÷ Total MQLs Passed to Sales × 100. Track by source channel and lead origin to identify which programmes produce the highest-quality lead flow.
MRR
Monthly Recurring Revenue — the predictable monthly revenue from all active subscriptions, the most granular measure of recurring revenue momentum.
Formula
Sum of all active subscription values normalised to a monthly amount. MRR = ARR ÷ 12 for annual contracts. Monthly contracts contribute their full contracted monthly value.
NPS
Net Promoter Score — measures customer loyalty by asking how likely customers are to recommend the product on a 0-10 scale, segmenting respondents into Promoters (9-10), Passives (7-8), and Detractors (0-6).
Formula
NPS = % Promoters − % Detractors. Scores range from −100 to +100. Above 50 is considered excellent; above 70 is world-class. Segment by account tier, industry, and cohort for actionable analysis.
NRR
Net Revenue Retention (Net Dollar Retention / NDR) — measures the percentage of recurring revenue retained from existing customers over a period, including expansion and contraction but excluding new logo revenue.
Formula
NRR = (Beginning MRR + Expansion MRR − Contraction MRR − Churned MRR) ÷ Beginning MRR × 100. Measured monthly or annually over a trailing 12-month cohort.
Pipeline Coverage
The ratio of total open pipeline value to the revenue target for a given period — measuring whether enough pipeline exists to achieve the quota.
Formula
Pipeline Coverage = Total Open Pipeline Value ÷ Revenue Target for the Period. A 3x ratio means $3 of open pipeline for every $1 of quota. Typical target: 3-4x for mature sales teams.
Pipeline Velocity
A composite measure of how quickly deals move through the pipeline, combining the number of opportunities, average deal size, win rate, and sales cycle length into a single revenue generation rate.
Formula
Pipeline Velocity = (Number of Opportunities × Average ACV × Win Rate) ÷ Average Sales Cycle Length in Days. Result is expressed as revenue generated per day.
Product Adoption Rate
The percentage of contracted users or features that customers are actively using, measuring how deeply a product has penetrated an account relative to its contracted capacity.
Formula
Adoption Rate = Active Users (or Used Features) ÷ Total Contracted Users (or Total Available Features) × 100. Define 'active' by a meaningful threshold — e.g., logged in and completed a core action in the last 30 days.
Quota Attainment
The percentage of assigned quota that a rep, team, or company achieved in a given period — the fundamental measure of revenue performance against plan.
Formula
Quota Attainment = Actual Revenue Closed ÷ Quota × 100. Track the full distribution — what % of reps are above 100%, 75-100%, 50-75%, and below 50% — not just the team average.
Ramp Time
The time it takes for a newly hired sales rep to reach full productivity, typically defined as achieving 100% of their fully ramped quota for the first time.
Formula
Ramp Time = Average months from hire date until a new rep achieves their first quarter at 100%+ quota attainment. Typical SaaS range: 4-9 months depending on deal complexity and market segment.
Revenue per Employee
Total company revenue divided by full-time equivalent headcount — a measure of organisational productivity and operational efficiency.
Formula
Revenue per Employee = Total Revenue (annualised) ÷ Total FTE Headcount. Track quarterly and benchmark against industry cohort.
Rule of 40
A software industry benchmark stating that a healthy SaaS business should have its ARR growth rate plus its profit margin (FCF or EBITDA margin) sum to 40% or greater.
Formula
Rule of 40 Score = ARR Growth Rate (%) + FCF Margin (% of revenue). Example: 60% ARR growth + −20% FCF margin = score of 40.
SQL-to-Opportunity Rate
The percentage of Sales Qualified Leads (SQLs) that progress to a formal sales opportunity — the conversion rate between SDR qualification and AE-accepted pipeline creation.
Formula
SQL-to-Opp Rate = New Opportunities Created from SQL Source ÷ Total SQLs × 100. Track per SDR and per AE to identify where the drop-off occurs.
Take Rate
For marketplace and platform businesses, the percentage of each transaction's GMV that the platform retains as revenue — also called the commission rate or monetisation rate.
Formula
Take Rate = Net Revenue ÷ GMV × 100. A marketplace processing $100M GMV and keeping $15M as revenue has a 15% take rate.
TCV
Total Contract Value — the total revenue committed across the full term of a contract, including all recurring and one-time fees over its entire duration.
Formula
TCV = Annual Recurring Value × Contract Term (years) + Any One-Time Fees. Example: a 3-year $100K/yr deal with $20K professional services = $320K TCV.
Time to Close
The average number of days from opportunity creation (or first meaningful engagement) to closed-won, measuring the length of the sales cycle.
Formula
Average Time to Close = Sum of Days from Opportunity Created to Close Date for All Won Deals ÷ Number of Won Deals. Track separately by segment, deal size, and deal type.
Time to Fill
For staffing and recruiting businesses, the number of days from job requisition opening to a candidate's accepted offer or confirmed placement — measuring recruiting and revenue cycle efficiency.
Formula
Time to Fill = Date of Accepted Offer − Date Requisition Opened, averaged across all filled positions in a period. Track separately by role category, seniority level, client industry, and placement type.
Utilisation Rate
For professional services and consulting businesses, the percentage of available billable hours that are actually billed to clients — the primary driver of services revenue and capacity efficiency.
Formula
Utilisation Rate = Billed Hours ÷ Available Billable Hours × 100. Target: typically 70-80% for client-facing consultants. Track weekly to catch trends early.
Win Rate
The percentage of sales opportunities that result in a closed-won deal, measured either by deal count or by revenue value.
Formula
Win Rate = Closed Won Opportunities ÷ (Closed Won + Closed Lost Opportunities) × 100. Measure separately by count and by ACV — a team can have a high count win rate but low ACV win rate if losing large deals disproportionately.
Written Premium
For insurance companies, the total policy premiums contracted during a period — including new business, renewals, and endorsements — before any reinsurance cessions. The insurance equivalent of ARR bookings.
Formula
Written Premium = Sum of All Policy Premiums Incepted During the Period. Distinct from Earned Premium (recognised over the policy term) and Unearned Premium Reserve.