7 SaaS Metrics That Actually Predict Revenue (Formulas & 2025 Benchmarks)

Part 2 of 3 | Reading Time: 8 minutes | Level: Intermediate to Advanced

The Metrics That Actually Matter

In Part 1, you learned why most SaaS companies track the wrong metrics. Now let's fix that.

This isn't a glossary. This is a complete breakdown of the 7 core metrics that actually predict revenue — including the formulas most people calculate wrong, 2025 benchmarks, and why each one matters.

Foundation Layer: Revenue & Growth Metrics

1. Monthly Recurring Revenue (MRR)

What it is: Predictable revenue normalized to a monthly amount.

Formula:

Why it's complex: Most people calculate this wrong. Here are the gotchas:

• One-time fees don't count (setup fees, professional services)
• Discounts reduce MRR (a $100/mo plan sold for $80 has $80 MRR)
• Paused accounts are tricky (industry standard: exclude them after 60 days)
• Free trials don't count until they convert

MRR Movement Categories:

• New MRR: Revenue from brand new customers
• Expansion MRR: Upsells, cross-sells, upgrades from existing customers
• Contraction MRR: Downgrades from existing customers
• Churned MRR: Revenue lost from cancellations

2025 Benchmarks:

• Seed stage: 15-30% MoM growth
• Series A: 10-20% MoM growth
• Series B+: 5-10% MoM growth
• Elite performers: Maintain 20%+ growth beyond Series A

💡 Image suggestion: Visual diagram showing MRR movement categories (New, Expansion, Contraction, Churned) flowing into Net New MRR calculation. Alt text: "SaaS MRR movement categories diagram showing how new, expansion, contraction, and churned MRR combine to calculate net new monthly recurring revenue"

2. Annual Recurring Revenue (ARR)

Formula:

When to use MRR vs ARR:

• Sub-$1M revenue: Track MRR (monthly matters more)
• $1M-$10M revenue: Track both
• $10M+ revenue: ARR becomes the standard
• Fundraising: Always use ARR (investors think annually)

The Nuance: ARR isn't just MRR × 12. With annual contracts, you need to handle:

• Prepaid annuals: Full year payment upfront (how do you count partial years?)
• Multi-year deals: $50K for 2 years = $25K ARR, not $50K
• Usage-based components: Average last 3 months, then annualize

3. Customer Acquisition Cost (CAC)

The Basic Formula (That's Actually Wrong):

The Real Formula (That Accounts for Everything):

Critical Timing Issue: Which period?

Most companies use the wrong time window. Here's why:

Month of spend ≠ Month of conversion

A lead acquired in January might not close until April. If you calculate January CAC using January customers, you're massively understating the real cost.

The Right Approach: Cohort-Based CAC

Track spend in one month, attribute customers to that spend based on their acquisition source, measure CAC after the sales cycle completes.

Example:

• January spend: $50,000
• Average sales cycle: 60 days
• Calculate January CAC in: March (after cycle completes)
• January leads that closed by March: 15
• True January CAC: $50,000 ÷ 15 = $3,333

2025 Benchmarks by ACV:

• $0-$5K ACV: CAC should be < $1,000
• $5K-$25K ACV: CAC should be $1,000-$5,000
• $25K-$100K ACV: CAC should be $5,000-$15,000
• $100K+ ACV: CAC can be $15,000-$50,000+

4. Customer Lifetime Value (LTV)

The Simple Formula (That Venture Capitalists Use):

Where:

• ARPU = Average Revenue Per User (monthly)
• Churn Rate = Monthly customer churn percentage

Example:

• ARPU: $500/month
• Monthly Churn: 2%
• LTV = $500 ÷ 0.02 = $25,000

The Complex Formula (That's Actually Accurate):

Why the complex formula matters:

1. Gross Margin: If your gross margin is 80%, you don't keep all the ARPU
2. Discount Rate: Money today > money in 3 years (usually 10% annually)
3. Growth Rate: If ARPU grows 2% monthly (upsells), LTV is higher

Even More Complex: Segmented LTV

Different customer segments have radically different LTVs:

• Enterprise: $250,000 LTV, 5% churn, 24-month sales cycle
• Mid-Market: $50,000 LTV, 10% churn, 6-month sales cycle
• SMB: $5,000 LTV, 25% churn, 1-month sales cycle

5. The LTV:CAC Ratio (The Single Most Important Metric)

Formula:

What the ratio means:

• < 1:1 - You're losing money on every customer (death spiral)
• 1:1 to 2:1 - Barely profitable, can't scale
• 3:1 - Healthy, venture-backable
• 4:1 to 5:1 - Elite, highly efficient
• > 5:1 - You're under-investing in growth (leave money on table)

The Hidden Complexity: Time

A 3:1 LTV:CAC looks great until you realize it takes 36 months to realize that LTV. Meanwhile, you paid CAC upfront in cash. This is why CAC Payback Period matters.

6. CAC Payback Period

Formula:

Example:

• CAC: $6,000
• ARPU: $500/month
• Gross Margin: 75%
• Payback = $6,000 ÷ ($500 × 0.75) = 16 months

2025 Benchmarks:

• World-class: < 12 months
• Good: 12-18 months
• Acceptable: 18-24 months
• Red flag: > 24 months

Middle Layer: Pipeline & Conversion Metrics

7. Pipeline Velocity

This is where it gets interesting. Pipeline velocity answers: "How fast is money moving through our funnel?"

Formula:

What this tells you:

If you have:

• 100 opportunities
• $10,000 average deal
• 25% win rate
• 60-day sales cycle

Why this is powerful:

If you increase ANY of these four variables by 10%, you increase revenue velocity by 10%. You can model exactly which lever to pull.

• Increase opps 10% (more marketing) → +10% velocity
• Increase deal size 10% (better packaging) → +10% velocity
• Increase win rate 10% (better sales process) → +10% velocity
• Decrease cycle 10% (remove friction) → +11% velocity (inverse relationship)

You Now Know What to Track

If you've made it this far, you understand the 7 core SaaS metrics better than most marketing leaders:

1. MRR & ARR - Your revenue baseline (and why growth rate matters more than absolute numbers)
2. CAC - The timing issues most people miss and why fully-loaded calculations matter
3. LTV - Why you need segment-specific calculations, not blended averages
4. LTV:CAC Ratio - The single most important efficiency metric (target: 3:1 to 5:1)
5. CAC Payback Period - Why cash flow matters more than profitability ratios
6. Pipeline Velocity - How to model which growth levers to pull

But knowing formulas isn't enough. The real value comes from understanding how these metrics interconnect and how to use them to make better decisions.

That's exactly what we cover in Part 3: the implementation roadmap, common calculation errors that tank companies, and real examples of how metrics drive decisions.

Need help implementing these metrics? If you're spending $50K+/month on marketing but can't predict ROI, let's talk.