The SaaS Metrics That Matter Most: Understanding the Unit Economics of Recurring Revenue

0 – If there’s one thing that any business dreams of, it’s customers that keep coming back over and over again. Customers that pay on a recurring basis—subscription customers—generate predictable revenue for your business. In fact, revenue predictability is worth so much that SaaS businesses built on subscription revenue receive higher valuations than their non-recurring peers of the same size and growth rate.

But to make this model work, you have to understand the math behind subscription revenue businesses. Subscription revenue businesses have their own metrics: MRR, LTV, CAC, and more, and understanding these metrics takes some work. Brad Feld recently warned founders about the danger of trying to fake the language around SaaS metrics, and he’s right: it’s incredibly easy for an experienced SaaS practitioner to spot someone who doesn’t really understand the difference between MRR and revenue.

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photo CC by Josep Ma. Rosell


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