SAAS Metrices
Software-as-a-Service (SaaS) metrics are often used to track revenue performance because the SaaS business model depends on predictable, recurring income rather than one-time license sales. Revenue is generated and recognized over the lifecycle of a customer relationship, making it essential for organizations to monitor indicators that reflect growth, stability, and retention. SaaS metrics provide a structured way to measure how effectively a company acquires customers, monetizes subscriptions, and sustains revenue over time.
Core revenue-focused SaaS metrics include Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR), which represent the normalized, recurring income a business can expect on a monthly or annual basis. These metrics form the foundation for revenue forecasting and growth analysis. Annual Contract Value (ACV) complements MRR and ARR by capturing the average annual revenue per customer contract, helping teams understand deal sizes and sales performance.
Retention-based metrics play an equally important role in assessing revenue health. Gross Revenue Retention (GRR) measures how much recurring revenue is retained from existing customers offering insight into customer churn and baseline stability. Net Revenue Retention (NRR) goes a step further by including expansion revenue, highlighting how well a company grows revenue within its existing customer base. Together, these SaaS metrics provide a comprehensive view of revenue performance, enabling data-driven decision-making, accurate financial forecasting, and sustained business growth.
| Annual Recurring Revenue | Annual Recurring Revenue (ARR) is the yearly value of recurring revenue from subscriptions. ARR excludes one‑time fees and is used to assess long‑term revenue scale and growth. |
| Monthly Recurring Revenue | Monthly Recurring Revenue (MRR) gives a short-term view of revenue. Helps track growth, churn, and expansion month over month. |
| Annual Contract Value | Annual Contract Value (ACV) measures the average annual value of a customer contract. Unlike ARR, it is customer-specific. ACV helps evaluate deal size and sales performance and may include recurring fees and any contractually committed charges over a year. |
| Gross Revenue Retention (GRR) | Gross Revenue Retention (GRR) reflects the percentage of revenue preserved from existing customers, excluding any expansion. GRR highlights churn and the stability of the existing customer base. |
| Net Revenue Retention (NRR) | Net Revenue Retention (NRR) represents the percentage of revenue retained including expansion gains. NRR indicates how effectively a company grows revenue within its current customer base. |
All the above metrices are calculated for asset line items.
Annual Recurring Revenue
Annual Recurring Revenue (ARR) is the yearly value of recurring revenue from subscriptions of standalone and bundle option products. ARR is calculated using the below formula:
ARR = Monthly Recurring Revenue (MRR) *12or
ARR = (Net Price/Total Selling Term) *12, where the frequency of the term is monthly.
The existing "Asset ARR" field is used of asset line items and the ARR is recalculated after any pricing or term change, supporting all charge types, ramp lines, and product types. ARR is not calculated for one-time lines, which display a value of zero.
Example 1: New selling term is 12 months, Net Price = 1200/- and hence ARR = (1200/12) *12 = 1200
Example 2: New selling term is 18 months, Net Price = 2000/- and hence ARR = (2000/18)*12 = 1333
Monthly Recurring Revenue
Monthly Recurring Revenue (MRR) gives a short-term view of revenue. Helps track growth, churn, and expansion month over month.
MRR = Annual Recurring Revenue/12MRR automatically updates when ARR is recalculated and excludes one-time lines, providing accurate monthly revenue metrics for finance, sales, and operations teams.
The amount is displayed as a field on the Asset line item. MRR is recalculated after each pricing change, supporting all recurring bundles, options, rollup lines, and ramp line items.
Annual Contract Value
Annual Contract Value (ACV) measures the average annual value of a customer contract. Unlike ARR, it is customer-specific. It is useful for sales teams to understand the value of deals. They can identify Average ACV on Quote level and on Account level.
ACV = Total Contract Value / Contract Duration (in years)The amount is displayed as a field on the Asset line item. The system recalculates ACV after each pricing change, supporting bundles, options, rollup lines, charge type, recurring, one-time, and ramp line items.
Example 1: If Total Contract Value (TCV) = $4500 and total Contract Duration =5 yrs then ACV=4500/5= $900
Example 2: Multi year ramp line: 3 year ramp asset with 10% annual uplift, base price=$100, frequency=monthly recurring.
- Year 1 ACV: $1,200
- Year 2 ACV: $1,320 (+10%)
- Year 3 ACV: $1,452 (+10%)
GRR and NRR
Gross Revenue Retention (GRR) reflects the percentage of revenue preserved from existing customers, excluding any expansion (upgrade). Net Revenue Retention (NRR), on the other hand, represents the percentage of revenue retained including expansion gains. Both metrics accept decimal values and are presented as percentages.
Base TCV, Contraction TCV, and Expansion TCV are fields on each Asset Line Item to support calculation of GRR and NRR.
GRR = ((Base TCV – Contraction TCV - Churn TCV) / Base TCV) × 100NRR = ((Base TCV – Contraction TCV -Churn TCV + Expansion TCV) / Base TCV) × 100Base TCV is total contractual value of new sale. Contraction TCV is total negative delta value of contraction. And Expansion TCV is total positive delta value of expansion.
Example of SAAS Metrices Calculation
The following table illustrates a one‑year SaaS subscription lifecycle scenario, showing how changes in price and quantity impact key revenue and asset‑based metrics over time. Starting from a new sale, the example walks through expansion, price increase, and contraction events, and demonstrates how Total Contract Value (TCV), ACV, ARR, and retention metrics (GRR and NRR) are calculated based on net price deltas.
| Base price | Term | Qty | Net price | Delta price | Asset TCV | Base TCV | ACV | ARR | Expansion TCV | Contraction TCV | Churn TCV | GRR (%) | NRR (%) | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| New Sale | 100 | 12 | 1 | 1200 | 1200 | 1200 | 1200 | 1200 | 1200 | 0 | 0 | 0 | 100 | 100 |
| Qty increase by 3 | 100 | 12 | 4 | 4800 | 3600 | 4800 | 1200 | 4800 | 4800 | 3600 | 0 | 0 | 100 | 400 |
| Price increase by 10% for 4 qty | 110 | 12 | 4 | 5280 | 480 | 5280 | 1200 | 5280 | 5280 | (3600+480) =4080 | 0 | 0 | 100 | 440 |
| Qty decrease by 2 | 110 | 12 | 2 | 2640 | -2640 | 2640 | 1200 | 2640 | 2640 | 4080 | 2640 | 0 | -120 | 220 |
GRR & NRR Impact Analysis for Multi-Year Subscription Lifecycle
A business use case illustrating how Gross Revenue Retention (GRR) and Net Revenue Retention (NRR) are calculated and interpreted across three key subscription events: a new sale, a seat expansion, and an early termination.
Overview
A B2B SaaS company offers a cloud-based document management platform. In 2019, the sales team closed a 3-year deal with Consulting Group, a mid-market professional services firm. Over the next two years, this subscription underwent two significant commercial events — a seat expansion and an early termination — each materially impacting how the B2B SaaS company's finance and Customer Success (CS) teams measure revenue health.
Actors
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B2B SaaS Company: The vendor providing the cloud-based document management platform.
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Consulting Group: The mid-market professional services firm acting as the customer.
Subscription Events
Event 1 — New Sale in 2019
Consulting Group's IT Procurement Manager signs a 36-month agreement for 1 seat at $100/month. RevOps creates the subscription asset in the CRM and records the following metrics:
| Metric | Value | ACV | ARR | Notes |
|---|---|---|---|---|
| Asset TCV | $3,600 | $1,200 | $1,200 | Baseline deal |
| GRR | 100% | — | — | No churn or contraction |
| NRR | 100% | — | — | No expansion yet |
Event 2 — Seat Expansion in 2020
| Metric | Value | ACV | ARR | Notes |
|---|---|---|---|---|
| Asset TCV | $6,000 | $2,000 | $2,000 | Updated post-expansion |
| Expansion TCV | +$2,400 | — | — | Delta from original TCV |
| GRR | 100% | — | — | No churn or contraction |
| NRR | 167% | — | — | ($3,600 - $0 + $2,400) / $3,600 |
Event 3 — Early Termination during end of 2020
| Metric | Value | ACV | ARR | Notes |
|---|---|---|---|---|
| Asset TCV | $4,800 | $2,400 | $2,400 | 24-month revised term |
| Expansion TCV | $2400 | — | — | Delta from original TCV |
| Contraction TCV | −$1,200 | — | — | $6,000 → $4,800 |
| GRR | 67% | — | — | ($3,600 − $0 - $1,200) / $3,600 |
| NRR | 133% | — | — | ($3,600 - $0 - $1200 + $2,400) / $3,600 |
Metrics Summary Across All Events
| Event | Asset TCV | ACV | ARR | GRR | NRR |
|---|---|---|---|---|---|
| 2019 — New Sale | $3,600 | $1,200 | $1,200 | 100% | 100% |
| 2020 — Seat Expansion | $6,000 | $2,000 | $2,000 | 100% | 167% |
| 2020 — Early Termination | $4,800 | $2,400 | $2,400 | 67% | 133% |
Key Takeaway
By industry standards, mid-market SaaS companies are expected to maintain a GRR of 85–95% and an NRR of 105–120%; this account's GRR of 67% falls significantly below the acceptable threshold, signalling a retention problem.