Reference

SaaS metrics glossary

Definitions and benchmark ranges for the metrics used throughout OperatorIndex. Each entry includes the formula (where applicable) and the benchmark range we observe across the cohort.

Net Revenue Retention(NRR)

The percentage of recurring revenue retained from existing customers over a period, including expansion and contraction but excluding net new logos. The single most important SaaS health metric: NRR above 100% means existing customers are expanding faster than they’re churning.

Formula: (Starting ARR + expansion - contraction - churn) / starting ARR. Measured over a trailing-12-month window.

Benchmark: Public median: 101% (2024, per Benchmarkit). Private SaaS median: 105%. Top quartile crosses 115% in mature SaaS; some vertical niches (legal practice software, healthcare) regularly clear 120%.

Customer Acquisition Cost Payback(CAC Payback)

The number of months it takes for the gross profit on a newly acquired customer’s ARR to equal the cost of acquiring them. Shorter payback = better unit economics.

Formula: Fully-loaded CAC / (new ARR × gross margin %). Months. CAC includes sales, marketing, sales engineering, and demand-gen spend.

Benchmark: Healthy: 12-18 months. Sub-12 months is exceptional. Above 24 months signals structural payback issues.

Rule of 40

A summary statistic combining growth rate and profit margin. Originally proposed as 40+ being the threshold for a "good" SaaS company.

Formula: Revenue growth rate (%) + EBITDA margin (%).

Benchmark: Public SaaS median Q1 2026: 28. Private vertical SaaS median: 12. Top-quartile crosses 50; the highest-performing operators run 25/25 (growth/margin) rather than 50/-10.

Magic Number

Sales efficiency metric: dollars of new ARR generated per dollar of sales-and-marketing spend in the trailing quarter.

Formula: Net new ARR in quarter × 4 / sales-and-marketing spend in prior quarter.

Benchmark: Above 0.75: invest more in growth. 0.5-0.75: balanced. Below 0.5: sales efficiency problem.

Gross Margin

The percentage of revenue remaining after Cost of Goods Sold (COGS). For SaaS, COGS includes hosting, third-party fees, customer support directly attributable to delivery, and (recently) AI inference costs.

Formula: (Revenue - COGS) / revenue.

Benchmark: Pure SaaS: 75-82%. Vertical SaaS with payment processing pass-through (restaurant tech, fintech): 20-35%. Legal vertical SaaS: 75-80%.

Gross Churn

The percentage of recurring revenue lost from existing customers due to downgrade or cancellation, before adding expansion revenue back.

Formula: (Lost ARR + downgrade ARR) / starting ARR, measured over a trailing-12-month window.

Benchmark: Healthy: 5-10% annual. Vertical SaaS with sticky workflows: 3-5%. Above 15% annually is a structural retention problem.

Net Dollar Retention(NDR)

Often used interchangeably with NRR, particularly by public SaaS companies in their earnings disclosures. ServiceTitan, Procore, and Toast all report NDR rather than NRR.

Formula: Same as NRR.

Annual Recurring Revenue(ARR)

The annualised value of subscription revenue at a point in time. The most common top-line metric in SaaS, used as the basis for valuation, growth-rate calculation, and benchmark cohort segmentation.

Monthly Recurring Revenue(MRR)

ARR / 12. More commonly used in SMB SaaS where the billing cycle is monthly. Mid-market and enterprise SaaS tends to report ARR directly.

Average Contract Value(ACV)

The average annualised revenue per customer contract. Used to characterise the deal-size profile of a SaaS business and to segment benchmark cohorts.

Formula: Total contract value / contract length in years.

Same-store-sales Growth(SSSG)

For vertical SaaS tied to customer transaction volume (especially restaurant tech), SSSG measures the year-over-year change in transaction volume on the existing customer base. Predictor of forward NRR by 1-2 quarters in payment-processing-heavy verticals.

Implementation Revenue

One-time revenue from onboarding, integration, training, and configuration services delivered alongside the SaaS subscription. Often reported as a separate line.

Benchmark: Healthy: 5-20% of total revenue. Above 35% suggests the business is more services than SaaS.

Services Revenue

Recurring revenue from managed services, ongoing professional services, or similar lines that are not subscription-based. Distinct from implementation revenue (which is one-time at customer acquisition).

EBITDA Margin

Earnings before interest, tax, depreciation, and amortisation, expressed as a percentage of revenue. Used in the Rule of 40 calculation alongside growth rate.

Burn Multiple

How much cash a SaaS business burns to generate a dollar of new ARR. Popularised by David Sacks (Craft Ventures) as a counterweight to Rule-of-40 reliance.

Formula: Net cash burn / net new ARR.

Benchmark: <1.0: efficient. 1.0-2.0: typical. >2.0: capital-intensive growth.

k-Anonymity

The privacy-preservation principle that no published statistic should be derivable to fewer than k individuals. OperatorIndex enforces k = 25 (n &ge; 25 per cohort) on every published benchmark snapshot. Below the floor, the pipeline rolls the cohort up to a broader segment before publishing.