C4 · Economics & metrics · 38 terms
Economics
& Metrics
Reconcile revenue stocks, then estimate contribution under explicit assumptions.
The MRR reconciliation
MRR Walk identity
Reads as: Ending MRR = Starting MRR + New + Expansion − Contraction − Churn + Other adjustments. Define reactivation, currency and reclassification consistently. MRR is distinct from recognized revenue, billings and collections; differential growth equations add assumptions beyond this reconciliation.
The unit economics stack
Define the customer unit, cost basis, revenue or contribution basis, cohort and horizon before comparing unit economics. CAC is required for LTV:CAC and acquisition payback; Rule of 40 uses separately defined growth and margin measures.
Customer Acquisition Cost estimator
Reads as: Acquisition spend divided by new customers using a stated cohort and allocation convention. Match costs to acquisition timing; a one-period lag is only a chosen approximation. Fully loaded costs include relevant headcount, tools and overhead.
CAC Payback Period estimator
Reads as: Months to recover acquisition cost under constant monthly contribution. When contribution changes with tenure, accumulate the expected cohort path to CAC. Annual NRR is not a denominator adjustment; cash recovery also depends on billing and collection timing.
LTV:CAC Ratio estimator
Reads as: ARPU × margin / churn is a constant customer-hazard scenario with matched period units and payment timing. A cohort estimate needs survival and contribution data; heterogeneous churn does not imply a universal haircut. Contribution LTV:CAC uses contribution LTV without multiplying margin a second time.
Rule of 40 / Rule of X directional
Reads as: Rule of 40 and Rule of X are descriptive scores. State the growth and margin definitions; estimate or scenario-test w for the relevant market, cohort and era. A valuation correlation does not identify the causal return to growth investment.
Magic Number estimator
Reads as: Annualized quarterly revenue change divided by prior-quarter sales and marketing spend. With an ARR numerator, do not annualize again. This blended descriptive score includes retention and other changes; compare it with incremental contribution before deciding to scale.
Retention economics
Retention, expansion and acquisition contribute to growth; their incremental returns depend on the target population and policy. An observed 120% NRR means the starting cohort's defined revenue stock grew 20% over that observation period. Continued compounding is a projection requiring stable cohort dynamics. NRR minus GRR equals expansion only under the same cohort, basis and adjustment conventions.
Net Revenue Retention (NRR) identity
Reads as: The ending defined recurring-revenue stock from the starting cohort, including expansion, divided by its starting stock. Separate reactivation, currency and price effects. Contract retention and customer value are different outcomes.
Gross Revenue Retention (GRR) identity
Reads as: Retention of the starting recurring-revenue stock excluding expansion, under the same cohort convention. It does not establish product adoption or customer value by itself.
Burn Multiple estimator
Reads as: Cash burned per dollar of net new ARR over a matched interval. Undefined at zero ARR change; negative or near-zero denominators need explicit interpretation. Descriptive bands do not identify the return on an additional dollar of spending.
Historical benchmark orientation
| Metric | Seed | Series A | Series B+ | Best-in-class |
|---|---|---|---|---|
| NRR | N/A | > 100% | > 110% | > 120% (Snowflake: 158%) |
| GRR | > 70% | > 80% | > 85% | > 90% |
| CAC Payback | < 24 mo | < 18 mo | < 12 mo | < 6 mo (PLG) |
| LTV:CAC | N/A | > 2:1 | > 3:1 | > 5:1 |
| Magic Number | N/A | > 0.5 | > 0.75 | > 1.0 |
| Rule of 40 | N/A | > 40 | > 50 | > 60 (Bessemer 2024) |
Calculators
Compare constant contribution and an explicit cumulative monthly cohort scenario; declare cash timing and horizon.
A finite-horizon contribution scenario with explicit customer churn and discount. Fitted cohort LTV requires additional data.
Compare descriptive growth and margin scores under an explicit weighting assumption.
Run the MRR conservation law in the browser. See the identity vs your current numbers.
Input ACV, deal velocity, and ICP profile. Get the optimal GTM motion and expected unit economics.
All 38 terms
- ACVAnnual / Average Contract Value The annualized value of a customer contract. Average ACV benchmarks deal size and is the primary input to choosing a GTM… metrics
- ARPAAverage Revenue Per Account Mean recurring revenue per customer account over a period. metrics
- ARRAnnual Recurring Revenue Contracted, recurring (usually subscription) revenue normalized to one year. The headline SaaS growth metric. metrics
- ASPAverage Selling Price The average price a product or class of products sells for in a market or channel. metrics
- Attributionattribution modeling, multi-touch attribution (MTA) Assigning credit for revenue/conversions to the marketing and sales touchpoints that influenced a deal — first-touch, mu… metrics
- Average Deal Size Mean revenue value of closed-won deals over a period; used to forecast and to design the motion. metrics
- Billings The total value of payments actually collected for committed contracts (vs. bookings, which is signed value). metrics
- Booking Rate The percentage of outbound touches/conversations that result in a scheduled meeting — a core SDR performance metric. metrics
- Bookings The total dollar value of new contracts signed in a period (in ACV or TCV) — a forward growth indicator. metrics
- CACCustomer Acquisition Cost The total sales+marketing cost to acquire one new customer. The core efficiency denominator. metrics
- CAC PaybackCAC payback period How many months of gross margin it takes to recoup CAC. A core capital-efficiency metric. metrics
- Churnchurn rate, logo churn, gross revenue churn The rate at which customers (logo churn) or revenue (revenue churn) is lost over a period. The leak in the bucket. metrics
- Closed-Won / Closed-Lost Terminal opportunity outcomes — a deal signed (won) or definitively dead (lost). Lost deals often re-enter nurture rathe… metrics
- Cohort Analysiscohort retention Tracking the retention, engagement, or expansion of a defined group of customers (usually grouped by signup period) over… metrics
- CPLCost Per Lead The average cost to generate one lead; a top-of-funnel efficiency metric. metrics
- Dark Funneldark social The untrackable influence (podcasts, communities, word-of-mouth, peer DMs) that drives buying but evades attribution sof… metrics
- Deal Healthdeal scoring A scored read on how likely an opportunity is to close, often derived from qualification (e.g. MEDDPICC) completeness, f… metrics
- Expansion Revenue Additional recurring revenue from existing customers via upsell, cross-sell, and upgrades. metrics
- Forecast Accuracy How closely sales forecasts match actual results over time. The credibility metric for RevOps and the basis for reliable… metrics
- GRRGross Revenue Retention Recurring revenue retained excluding expansion — pure leak measure; capped at 100%. metrics
- Leading vs Lagging Indicators Leading indicators are early signals (demo requests, conversations) that predict outcomes; lagging indicators are the ou… metrics
- LTVLifetime Value, CLV / LTV The total revenue (or gross profit) expected from a customer over the whole relationship. metrics
- LTV:CACLTV-to-CAC ratio Lifetime value divided by acquisition cost; a headline measure of GTM efficiency (3:1 is a common rule-of-thumb target). metrics
- Magic NumberSaaS Magic Number A sales-and-marketing efficiency ratio: net new ARR in a quarter divided by the prior quarter's S&M spend. Above ~1.0 su… metrics
- MRRMonthly Recurring Revenue Recurring revenue normalized to one month; ARR/12 for steady subscriptions. metrics
- NPSNet Promoter Score A loyalty metric based on how likely customers are to recommend the product. metrics
- NRRNet Revenue Retention, NDR Recurring revenue retained from existing customers including expansion, net of churn and contraction. Above 100% means t… metrics
- Pipeline Coveragepipeline-to-quota ratio Pipeline value divided by quota, estimating whether there's enough in-progress business to hit target. ~3–4x is a common… metrics
- Retention The degree to which customers stay and keep paying; the foundation of recurring-revenue economics. metrics
- Rule of 40 A SaaS health benchmark: revenue growth rate (%) plus profit margin (%) should sum to at least 40. Codifies the growth-v… metrics
- Sales Cyclesales cycle length The average time from first opportunity to closed-won. Longer for high-ACV, multi-stakeholder deals. metrics
- Sales Forecastingforecast, commit Predicting future revenue from historical data, trends, and current pipeline. 'Commit' is the number a rep stands behind… metrics
- Sales Velocity The rate at which deals move through the pipeline to generate revenue — a function of opportunity count, average deal si… metrics
- Self-Reported Attribution Asking buyers directly ('How did you hear about us?') to capture influence that tracking software misses. metrics
- TCVTotal Contract Value The cumulative value of a contract across its full term, including recurring and one-time charges. metrics
- Vanity Metrics Numbers that look good but don't tie to revenue (impressions, raw downloads). The trap of optimizing for activity instea… metrics
- Win Rate The percentage of qualified opportunities that become closed-won. ~20–25% on qualified oppties is a common SLG benchmark… metrics
- Win/Loss Analysis A structured post-decision review capturing why buyers chose you (win) or a competitor/no-decision (loss). The feedback … metrics