Metrics for subscription revenue

Metrics that provide insight into your business's financial health, customer lifecycle, and overall subscription model performance

Monthly Recurring Revenue (MRR)

• Definition: MRR is the predictable and recurring revenue generated from customers on a monthly basis. It’s one of the most fundamental metrics for subscription businesses.

• Why It Matters: MRR provides a snapshot of the business's financial health and allows you to forecast future revenue. By tracking MRR, you can assess growth and identify trends in customer acquisition or churn.

• Calculation:

Annual Recurring Revenue (ARR)

• Definition: ARR is similar to MRR, but it represents the total recurring revenue expected annually from all active subscribers.

• Why It Matters: ARR offers a longer-term view of subscription revenue and can help with strategic planning and forecasting over a yearly period.

• Calculation:

Customer Churn Rate

• Definition: Customer churn rate is the percentage of customers who cancel or do not renew their subscriptions over a given period (typically monthly or annually).

• Why It Matters: Churn is a major factor in the growth of a subscription-based business. A high churn rate can offset customer acquisition efforts and lead to revenue decline.

• Calculation:

Net Revenue Retention (NRR)

• Definition: NRR measures revenue growth or decline from existing customers, accounting for upgrades, downgrades, and churn.

• Why It Matters: NRR is a strong indicator of customer satisfaction and the effectiveness of upselling or cross-selling strategies. An NRR greater than 100% indicates that existing customers are generating more revenue than is lost due to churn.

• Calculation:

Gross Revenue Retention (GRR)

• Definition: Gross Revenue Retention (GRR) is a metric that measures the percentage of revenue retained from existing customers over a given period, excluding any new customer revenue. It takes into account factors like customer churn (lost revenue due to cancellations), downgrades, and expansion (e.g., upgrades or upsells) from existing customers.

• Why It Matters: GRR helps businesses understand how much revenue they've been able to maintain from their existing customer base, which is a key indicator of customer satisfaction and loyalty.

• Calculation:

Average Revenue Per User (ARPU)

• Definition: ARPU is the average revenue generated per customer over a given period, typically monthly or annually.

• Why It Matters: ARPU is a useful metric to track the overall value that each customer brings to the business and helps to identify pricing opportunities or areas for customer segmentation.

• Calculation: