Metrics for Tracking Recurring Revenue

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

There are several metrics to track the health of a recurring revenue business.

Here are some key metrics to know:

Cost of customer acquisition -- this calculates how much sales and marketing spend goes into signing up a new customer.

Life-time value -- this calculates how much a customer spends on the product over the lifetime of that customer on average.

CAC:LTV ratio -- compares the cost of customer acquisition with the lifetime value to create a ratio.

A 1:3 ratio is the floor for a successful business.

ARR -- annual recurring revenue measures the revenue based on annual contracts.

MRR -- monthly recurring revenue measures the revenue based on monthly contracts.

Net MRR -- this measures the amount of additional revenue the company generates month over month.

Churn -- the percentage of customers who opt out of using the product by canceling.

ACV -- Average Contract Value -- this is the amount customers are paying for the product on average.

ARB -- Annual Recurring Billings -- this is the amount all customers pay annually.

Track these metrics so you understand the current state of your recurring revenue business.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

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