C4 · Economics & metrics · 38 terms
Economics
& Metrics
The MRR walk is the only GTM identity. Everything else is an estimator.
The MRR walk (the one true identity)
MRR Walk identity
Reads as: New MRR = Starting MRR + New-business MRR + Expansion MRR − Churned MRR − Contracted MRR. This is an accounting identity — it cannot be false for any subscription business.
The unit economics stack
Unit economics must be read in order. CAC is the input; everything else is derived. A company that doesn't know its CAC cannot interpret payback, LTV:CAC, or Rule of 40 accurately.
Customer Acquisition Cost estimator
Reads as: Total sales & marketing spend in the prior period divided by net new customers acquired. The one-period lag corrects for pipeline lag. Blended CAC mixes channels; fully-loaded CAC includes headcount and overhead.
CAC Payback Period estimator
Reads as: Months until gross profit from a new customer recovers its acquisition cost. NRR-adjusted payback = CAC / (ACV × GM × NRR) — faster when NRR > 100%.
LTV:CAC Ratio estimator
Reads as: Lifetime value is ARPU times gross margin divided by monthly churn. The naive formula overstates LTV at high churn — use sBG-corrected LTV for accuracy. Target: > 3:1 at Series B.
Rule of 40 / Rule of X directional
Reads as: Rule of 40 says a healthy SaaS company's growth rate plus free-cash-flow margin should exceed 40. Rule of X weights growth 1.33× because markets pay more for growth than margin — it correlates 2× better with valuation multiples per Bessemer 2024.
Magic Number estimator
Reads as: How many dollars of annualised new ARR are generated per dollar of S&M spend. > 0.75 = good efficiency; > 1.0 = invest aggressively; < 0.5 = fix go-to-market before scaling spend.
Retention economics
Retention is not a post-sale function — it is the primary growth lever in mature SaaS. A company with 120% NRR grows its existing base 20% per year without a single new customer. GRR floors the business; NRR determines the ceiling. The gap between NRR and GRR is the expansion rate.
Net Revenue Retention (NRR) identity
Reads as: What percentage of last period's revenue is still active this period, including upsell and expansion. NRR > 100% means the cohort grows without new customers. Best-in-class: > 120% (Snowflake hit 158% at IPO).
Gross Revenue Retention (GRR) identity
Reads as: What percentage of last period's revenue is retained, excluding expansion. GRR is the floor — it measures pure retention quality. Best-in-class enterprise: > 90%. GRR < 70% signals a retention crisis regardless of NRR.
Burn Multiple estimator
Reads as: How many dollars are burned to generate each dollar of new ARR. < 1× = excellent; 1–1.5× = good; > 2× = investigate. Introduced by David Sacks as an efficiency complement to Rule of 40.
Benchmark quick reference
| 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
Calculate simple and NRR-adjusted payback period. Compare to stage benchmarks.
Naive LTV vs sBG-corrected LTV. The corrected version is typically 20–60% lower.
Score your company against both frameworks. Rule of X correlates 2× better with valuations.
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