Product metric. Part 4- Revenue Metrics


Revenue Metrics

1. Monthly Recurring Revenue (MRR)

Definition: Predictable monthly revenue from subscriptions.
Formula:
MRR = Number of Customers × Average Revenue per Customer (per month)

Examples:

  • SaaS: 500 customers paying ₹2,000/month →
    MRR = 500 × 2000 = ₹10,00,000
  • Online Gym App: 2,000 users at ₹500/month → ₹10,00,000 MRR.
  • Cloud Storage: 1,000 users at ₹800 → ₹8,00,000 MRR.

2. Annual Recurring Revenue (ARR)

Definition: Predictable yearly revenue from subscriptions.
Formula:
ARR = MRR × 12

Examples:

  • SaaS: ₹10,00,000 MRR →
    ARR = 10,00,000 × 12 = ₹1.2 Cr
  • Enterprise HR Software: ₹50,000 MRR → ₹6,00,000 ARR.
  • Health Analytics Platform: ₹75,000 MRR → ₹9,00,000 ARR.

3. Average Revenue Per User (ARPU)

Definition: Average revenue generated per active user in a time period.
Formula:
ARPU = Total Revenue / Total Users

Examples:

  • Streaming App: ₹5,00,000 revenue from 10,000 users →
    ARPU = ₹50
  • Online Education: ₹8,00,000 from 2,000 users → ₹400.
  • Mobile Game: ₹1,00,000 from 20,000 players → ₹5.

4. Revenue Churn Rate

Definition: % of revenue lost from downgrades/cancellations.
Formula:
Revenue Churn = (Lost Revenue / Total Revenue at Start) × 100

Examples:

  • SaaS: ₹20,000 lost from ₹2,00,000 →
    = (20000 / 200000) × 100 = 10%
  • Digital News: ₹5,000 lost due to unsubscribes out of ₹50,000.
  • Fitness App: 8% MRR lost from users pausing plans.

5. Net Revenue Retention (NRR)

Definition: % of revenue retained including upgrades, expansions.
Formula:
NRR = [(Starting MRR - Churned MRR + Expansion MRR) / Starting MRR] × 100

Examples:

  • SaaS: Starting ₹1,00,000, lost ₹10,000, upsell ₹20,000 →
    = (1,00,000 - 10,000 + 20,000)/1,00,000 = 110%
  • B2B Health SaaS: ₹50,000 retained with ₹5,000 expansion.
  • Accounting Software: 95% NRR with few downgrades.

6. Customer Lifetime Value (CLTV / LTV)

Definition: Total revenue a customer is expected to generate.
Formula:
CLTV = ARPU × Customer Lifetime (months)

Examples:

  • SaaS: ARPU ₹2,000, lifetime 20 months →
    LTV = 2000 × 20 = ₹40,000
  • Subscription Meal Kit: ₹1,000/month, lifetime 12 months → ₹12,000.
  • Stock Trading App: ₹150/month × 36 months = ₹5,400.

7. Customer Value to CAC Ratio (LTV:CAC)

Definition: Measures ROI on customer acquisition.
Formula:
LTV : CAC = CLTV / CAC

Examples:

  • SaaS: LTV ₹40,000, CAC ₹10,000 →
    Ratio = 4:1 (Excellent)
  • Online Coaching: ₹15,000 LTV vs ₹5,000 CAC → 3:1.
  • Digital Bank: ₹6,000 LTV vs ₹3,000 CAC → 2:1.

8. Revenue Per Employee

Definition: Measures operational efficiency.
Formula:
Revenue Per Employee = Total Revenue / Number of Employees

Examples:

  • SaaS Startup: ₹5 Cr revenue with 50 employees →
    = ₹10,00,000 per employee
  • Online Retailer: ₹2 Cr with 20 employees.
  • MedTech Firm: ₹12 Cr with 80 employees → ₹15L/employee.

 

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