Question 1

What is MRR (Monthly Recurring Revenue)?

Accepted Answer

MRR is the predictable monthly revenue from all active subscriptions. It's calculated as the number of paying customers × average revenue per user (ARPU). MRR is the single most important SaaS metric.

Question 2

What is a good LTV:CAC ratio?

Accepted Answer

A healthy LTV:CAC ratio is 3:1 or higher — meaning the lifetime value of a customer is at least 3× what it costs to acquire them. Below 1:1 means you're losing money on every customer. Above 5:1 may mean you're under-investing in growth.

Question 3

What is a good CAC payback period?

Accepted Answer

For SaaS companies: < 6 months is excellent, 6-12 months is good, 12-18 months is acceptable, > 18 months is concerning. Enterprise SaaS can tolerate longer payback periods due to higher contract values.

Question 4

What is a good churn rate?

Accepted Answer

Monthly churn benchmarks: < 2% is excellent (B2B SaaS), 3-5% is average for SMB SaaS, 5-7% is acceptable for consumer apps, > 7% is a significant concern. Even 1% difference in monthly churn compounds dramatically over a year.

Question 5

How do I calculate LTV?

Accepted Answer

Basic LTV formula: ARPU ÷ Monthly Churn Rate. For example: $49/month ÷ 5% churn = $980 LTV. This assumes constant pricing and churn. More sophisticated models factor in expansion revenue and variable churn.

Question 6

Should I offer annual billing?

Accepted Answer

Yes. Benefits of annual plans: (1) Improved cash flow, (2) Lower effective churn (annual commitment), (3) Higher LTV, (4) Reduced payment failures. Standard discount is 15-20% off monthly pricing.

Question 7

How do I reduce churn?

Accepted Answer

Key strategies: (1) Improve onboarding (most churn happens in first 90 days), (2) Proactive customer success, (3) Build habit-forming features, (4) Annual contracts, (5) Dunning management for failed payments, (6) Exit surveys to understand reasons.

Question 8

What pricing model should I use?

Accepted Answer

Common SaaS pricing models: Per-user (most common), Usage-based (growing trend), Flat-rate (simple), Tiered (good/better/best), Freemium (acquisition tool). Choose based on your value metric — what customers actually pay for.

Question 9

What is net revenue retention?

Accepted Answer

Net Revenue Retention (NRR) = (Starting MRR + Expansion - Contraction - Churn) / Starting MRR. Above 100% means revenue grows even without new customers. Best-in-class SaaS companies have 120-130% NRR.

Question 10

How accurate are these projections?

Accepted Answer

These projections assume constant pricing, churn rate, and new customer acquisition. Real-world results vary based on seasonality, market conditions, product changes, and expansion revenue. Use these as directional estimates.

Month	Customers	MRR	Churned	Cumulative Rev
Start	100	$4,900	—	$0
Month 1	115	$5,635	-6	$4,900
Month 2	129	$6,321	-6	$10,535
Month 3	143	$7,007	-7	$16,856
Month 4	156	$7,644	-8	$23,863
Month 5	168	$8,232	-8	$31,507
Month 6	180	$8,820	-9	$39,739
Month 7	191	$9,359	-10	$48,559
Month 8	201	$9,849	-10	$57,918
Month 9	211	$10,339	-11	$67,767
Month 10	220	$10,780	-11	$78,106
Month 11	229	$11,221	-11	$88,886
Month 12	238	$11,662	-12	$100,107

Month	Customers	MRR	Churned	Cumulative Rev
Start	100	$4,900	—	$0
Month 1	115	$5,635	-6	$4,900
Month 2	129	$6,321	-6	$10,535
Month 3	143	$7,007	-7	$16,856
Month 4	156	$7,644	-8	$23,863
Month 5	168	$8,232	-8	$31,507
Month 6	180	$8,820	-9	$39,739
Month 7	191	$9,359	-10	$48,559
Month 8	201	$9,849	-10	$57,918
Month 9	211	$10,339	-11	$67,767
Month 10	220	$10,780	-11	$78,106
Month 11	229	$11,221	-11	$88,886
Month 12	238	$11,662	-12	$100,107

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