Saas Metrics Arr Churn Ltv Practice Exam

Question 1 Saas Metrics Arr Churn Ltv

What is net dollar retention (NDR)?

The percentage of starting ARR retained from existing customers, including both downgrades and expansion. Can exceed 100%. LTV = (ARPU × gross margin %) / churn rate Packaging the product into named tiers (e.g., Basic, Pro, Enterprise) with feature/usage limits. Often 20-40% of churn events in B2B SaaS come from failed payments rather than active cancellations.

Question 2 Saas Metrics Arr Churn Ltv

What is the most common cause of high logo churn in SMB SaaS?

Gross churn is total revenue lost; revenue churn is a rate. They are related by the denominator. Growth rate (%) + profit margin (%) should equal or exceed 40%. Failure to reach activation/a-ha moments and lack of ongoing engagement with the product. Gross margin subtracts COGS only; contribution margin also subtracts variable S&M and service costs.

Question 3 Saas Metrics Arr Churn Ltv

What LTV:CAC ratio suggests under-investment in growth?

Heavy dependence on a small number of large customers, common in early-stage enterprise SaaS. Below 3:1, meaning the business may be leaving growth on the table. Free-to-paid conversion rates of 3-8% are common in healthy PLG businesses. LTV = (ARPU × gross margin %) / churn rate

Question 4 Saas Metrics Arr Churn Ltv

What is negative net revenue churn?

Top-quartile B2B SaaS companies report 90%+ annual GDR. ARPA is Average Revenue Per Account; ARPU is Average Revenue Per User. In B2B SaaS, ARPA is usually the relevant figure. A situation where expansion revenue from existing customers exceeds churn + downgrade revenue, so net churn is below 0%. ARR = MRR × 12

Question 5 Saas Metrics Arr Churn Ltv

What is the difference between churn rate and retention rate?

Retention rate + Churn rate = 100% (for a simple period). They are complements. Total Contract Value: the full contract value over its entire term, including all fees. The normalized monthly value of all recurring subscription revenue, excluding one-time and non-recurring charges. The percentage of starting ARR retained from existing customers, including both downgrades and expansion. Can exceed 100%.

Question 6 Saas Metrics Arr Churn Ltv

What is contracted ARR?

Average Revenue Per User (or Per Account) in a defined period, typically a month. Synonym for logo churn: the rate at which customers cancel. Generally 100%+; below 100% means existing customers are net shrinking. ARR that is signed and active, excluding pipeline.

Question 7 Saas Metrics Arr Churn Ltv

What is a good NPS for B2B SaaS?

3:1 or higher is the common rule of thumb. Under 12 months for SMB SaaS, under 18-24 months for enterprise SaaS. Above 30 is solid; above 50 is excellent. Below 3:1, meaning the business may be leaving growth on the table.

Question 8 Saas Metrics Arr Churn Ltv

What is billings?

The amount invoiced to customers in a period, which may differ from recognized revenue. Revenue from previously churned customers who return and re-subscribe. Top 10% of customers can account for 50%+ of ARR; this declines as the base grows. Total ARR divided by active customer count; the average account size in annualized terms.

Question 9 Saas Metrics Arr Churn Ltv

What is NPS?

Mid-market typically refers to customers with 100-1000 employees or $10k-$100k ACV; enterprise is larger and more complex. A situation where expansion revenue from existing customers exceeds churn + downgrade revenue, so net churn is below 0%. Low-margin businesses recover CAC slowly, so the same nominal revenue delivers lower LTV. Net Promoter Score: % Promoters minus % Detractors among customers surveyed.

Question 10 Saas Metrics Arr Churn Ltv

What quick ratio is considered strong?

The full set of active customer contracts and their recurring revenue. Net Promoter Score: % Promoters minus % Detractors among customers surveyed. Above 4 is typically considered great, above 2 is solid. Often $1k-$10k per year, depending on product and segment.

Question 11 Saas Metrics Arr Churn Ltv

What is the difference between mid-market and enterprise in SaaS?

Mid-market typically refers to customers with 100-1000 employees or $10k-$100k ACV; enterprise is larger and more complex. Below 1:1, meaning each customer costs more to acquire than they will return. Often $1k-$10k per year, depending on product and segment. Heavy dependence on a small number of large customers, common in early-stage enterprise SaaS.

Question 12 Saas Metrics Arr Churn Ltv

What is the difference between customer success and customer support?

Customer success is proactive, driving adoption and retention; support is reactive, resolving issues as they arise. The time from first serious prospect engagement to closed-won deal. Total ARR divided by headcount; a rough productivity benchmark. Above 120%, with leaders often 130%+.

Question 13 Saas Metrics Arr Churn Ltv

What is a typical cloud hosting cost as % of revenue for SaaS?

(Starting ARR + Expansion − Contraction − Churn) / Starting ARR. Often 10-25% of revenue depending on usage-based components and scale. Lower churn increases LTV; doubling churn rate approximately halves LTV in the simple model. Often 1-4 weeks for self-serve or transactional, up to a few months for sales-assisted.

Question 14 Saas Metrics Arr Churn Ltv

What is a "good" monthly logo churn rate for SaaS?

Annual Recurring Revenue (Customers lost in period / Customers at start of period) × 100%. B2B SaaS often targets under 1% monthly logo churn (≈12% annual). 3:1 or higher is the common rule of thumb.

Question 15 Saas Metrics Arr Churn Ltv

What is the basic formula to convert MRR to ARR?

New MRR (new logos), Expansion MRR, Contraction MRR, and Churn MRR. Net new MRR = New + Expansion − Contraction − Churn. ARR = MRR × 12 At scale, the existing customer base is the largest addressable source of net new ARR, so NDR compounds growth. GDR excludes expansion revenue; NDR includes it. Both apply to a defined cohort of existing customers.

Question 16 Saas Metrics Arr Churn Ltv

What is ARPU?

Higher gross margin increases LTV linearly; lower margin reduces it proportionally. Often 1-4 weeks for self-serve or transactional, up to a few months for sales-assisted. Average Revenue Per User (or Per Account) in a defined period, typically a month. Top 10% of customers can account for 50%+ of ARR; this declines as the base grows.

Question 17 Saas Metrics Arr Churn Ltv

How is ARPU calculated?

Recurring revenue in the period divided by the number of customers in that period. Direct costs of delivering the service: hosting, third-party APIs, payment processing, customer success/onboarding for some definitions. Negative churn means existing customers are a net source of new revenue; negative growth means the whole company is shrinking. Gross retention measures revenue kept from the existing base; net retention adds back expansion.

Question 18 Saas Metrics Arr Churn Ltv

What is an expansion vector?

Often $1k-$10k per year, depending on product and segment. A specific path to grow revenue from an existing customer, e.g., more seats, higher tier, more usage. Free-to-paid conversion rates of 3-8% are common in healthy PLG businesses. Revenue from previously churned customers who return and re-subscribe.

Question 19 Saas Metrics Arr Churn Ltv

What is a "good" annual gross revenue churn rate?

Under 5-7% annually is typical for B2B SaaS; best-in-class is below 5%. Total ARR divided by active customer count; the average account size in annualized terms. A chart of the percentage of a cohort still active over time since acquisition. Higher ARPU increases LTV linearly, holding churn constant.

Question 20 Saas Metrics Arr Churn Ltv

What percentage of churn is typically involuntary?

Gross new ARR is from new logos only; net new ARR is gross plus expansion minus churn and contraction. The ratio of ARR added in a quarter to the sales & marketing spend in the prior quarter. Formula: (Net new ARR quarter × 4) / prior quarter S&M spend. Monthly Recurring Revenue Often 20-40% of churn events in B2B SaaS come from failed payments rather than active cancellations.

Question 21 Saas Metrics Arr Churn Ltv

What is the difference between gross churn and revenue churn?

Gross churn is total revenue lost; revenue churn is a rate. They are related by the denominator. Low-margin businesses recover CAC slowly, so the same nominal revenue delivers lower LTV. S&M efficiency is a period measure of spend vs new ARR; LTV:CAC is a lifetime economic ratio. The amount invoiced to customers in a period, which may differ from recognized revenue.

Question 22 Saas Metrics Arr Churn Ltv

What is usage-based pricing?

Pricing tied to a customer's consumption of the product, e.g., per API call or GB stored. The balance between growth and profitability: a SaaS can be unprofitable but fast, or profitable but slow, and still score 40+. The percentage of starting ARR retained from existing customers, including both downgrades and expansion. Can exceed 100%. Recognize subscription revenue ratably over the contract term, starting on the go-live date.

Question 23 Saas Metrics Arr Churn Ltv

What is ARR per customer?

Total ARR divided by active customer count; the average account size in annualized terms. A chart of the percentage of a cohort still active over time since acquisition. B2B SaaS often targets under 1% monthly logo churn (≈12% annual). Cohort-based: sum the actual cumulative gross-margin revenue from a cohort divided by the number of customers in it.

Question 24 Saas Metrics Arr Churn Ltv

What is a typical B2B SaaS gross margin?

Grouping customers by a shared start period and tracking their behavior over time. Average Revenue Per User (or Per Account) in a defined period, typically a month. 70-85%; the recurring, hosted nature drives high contribution per incremental customer. Top 10% of customers can account for 50%+ of ARR; this declines as the base grows.

Question 25 Saas Metrics Arr Churn Ltv

What is gross MRR churn?

Reduction in recurring revenue from existing customers via downgrades or seat reductions. Committed Monthly Recurring Revenue: MRR that is under contract and expected, often excluding trials. ARR that is signed and active, excluding pipeline. The percentage of recurring revenue lost in a period from cancellations and downgrades, before any expansion revenue is added.

Question 26 Saas Metrics Arr Churn Ltv

What is a typical enterprise SaaS sales cycle?

The average duration of customer contracts, often measured in months or years. Revenue booked to the income statement in a period, per the revenue recognition policy (e.g., ratably over the contract term). A grid showing retention rate by cohort (rows) and months since signup (columns). Often 6-12 months, sometimes longer for very large or strategic deals.

Question 27 Saas Metrics Arr Churn Ltv

What is the difference between S&M efficiency and LTV:CAC?

S&M efficiency is a period measure of spend vs new ARR; LTV:CAC is a lifetime economic ratio. Often $50k+ per year, sometimes $100k+, depending on the segment. The count of new customers added in a period net of churned customers. LTV = ARPU / churn rate (using the same period for both inputs).

Question 28 Saas Metrics Arr Churn Ltv

What is net new logo growth?

A specific path to grow revenue from an existing customer, e.g., more seats, higher tier, more usage. The percentage of customers from a starting cohort that remain active after a defined period. The count of new customers added in a period net of churned customers. Low-margin businesses recover CAC slowly, so the same nominal revenue delivers lower LTV.

Question 29 Saas Metrics Arr Churn Ltv

What Magic Number suggests S&M is efficient?

Higher ARPU increases LTV linearly, holding churn constant. Recognize subscription revenue ratably over the contract term, starting on the go-live date. Above 1.0; above 0.75 is reasonable; below 0.5 suggests inefficient spend. MRR = ARR / 12

Question 30 Saas Metrics Arr Churn Ltv

What does MRR stand for?

The process of retrying failed payments and communicating with customers to recover revenue and reduce involuntary churn. A grid showing retention rate by cohort (rows) and months since signup (columns). Direct costs of delivering the service: hosting, third-party APIs, payment processing, customer success/onboarding for some definitions. Monthly Recurring Revenue

Question 31 Saas Metrics Arr Churn Ltv

What is a typical enterprise SaaS ACV?

Often $50k+ per year, sometimes $100k+, depending on the segment. Churn is water leaking from a bucket of customers; expansion is water being added. Net new MRR is the change in bucket level. Below 3:1, meaning the business may be leaving growth on the table. Customer Acquisition Cost: total sales and marketing spend in a period divided by new customers added in that period.

Question 32 Saas Metrics Arr Churn Ltv

What is a usage-based component?

A portion of price that scales with consumption, layered on a base subscription. Failure to reach activation/a-ha moments and lack of ongoing engagement with the product. Customer success is proactive, driving adoption and retention; support is reactive, resolving issues as they arise. Often 20-40% of churn events in B2B SaaS come from failed payments rather than active cancellations.

Question 33 Saas Metrics Arr Churn Ltv

What is the simplest LTV formula?

Gross new ARR is from new logos only; net new ARR is gross plus expansion minus churn and contraction. A curve that initially flattens or improves, then declines — common in products with seasonal or compounding usage. LTV = ARPU / churn rate (using the same period for both inputs). Lower churn increases LTV; doubling churn rate approximately halves LTV in the simple model.

Question 34 Saas Metrics Arr Churn Ltv

What is the retention curve?

A chart of the percentage of a cohort still active over time since acquisition. Often 20-40% of churn events in B2B SaaS come from failed payments rather than active cancellations. Low-margin businesses recover CAC slowly, so the same nominal revenue delivers lower LTV. ARR that is signed and active, excluding pipeline.

Question 35 Saas Metrics Arr Churn Ltv

What is a typical SaaS revenue recognition policy?

The time from first serious prospect engagement to closed-won deal. Above 30 is solid; above 50 is excellent. Recognize subscription revenue ratably over the contract term, starting on the go-live date. A situation where expansion revenue from existing customers exceeds churn + downgrade revenue, so net churn is below 0%.

Question 36 Saas Metrics Arr Churn Ltv

What is contraction revenue?

3:1 or higher is the common rule of thumb. Reduction in recurring revenue from existing customers via downgrades or seat reductions. Higher ARPU increases LTV linearly, holding churn constant. Cohort-based: sum the actual cumulative gross-margin revenue from a cohort divided by the number of customers in it.

Question 37 Saas Metrics Arr Churn Ltv

What is LTV:CAC?

MRR = ARR / 12 Highly variable; high-growth SaaS may spend 50-80% of revenue on S&M, declining as the company matures. The ratio of customer lifetime value to customer acquisition cost; a key SaaS efficiency metric. Higher ARPU increases LTV linearly, holding churn constant.

Question 38 Saas Metrics Arr Churn Ltv

What is the difference between ARPA and ARPU?

Gross margin subtracts COGS only; contribution margin also subtracts variable S&M and service costs. ARPA is Average Revenue Per Account; ARPU is Average Revenue Per User. In B2B SaaS, ARPA is usually the relevant figure. Revenue from previously churned customers who return and re-subscribe. Retention rate + Churn rate = 100% (for a simple period). They are complements.

Question 39 Saas Metrics Arr Churn Ltv

What is the difference between gross retention and gross margin?

It scores 50, passing the Rule of 40 despite zero profit margin. Additional recurring revenue from existing customers via upsells, cross-sells, or seat expansion. Gross retention measures revenue kept from customers; gross margin measures profit per dollar of revenue after COGS. Grouping customers by a shared start period and tracking their behavior over time.

Question 40 Saas Metrics Arr Churn Ltv

What is annual gross dollar retention benchmark?

Cohort-based: sum the actual cumulative gross-margin revenue from a cohort divided by the number of customers in it. Gross margin subtracts COGS only; contribution margin also subtracts variable S&M and service costs. Top-quartile B2B SaaS companies report 90%+ annual GDR. A situation where expansion revenue from existing customers exceeds churn + downgrade revenue, so net churn is below 0%.

Question 41 Saas Metrics Arr Churn Ltv

What is average contract length (ACL)?

The average duration of customer contracts, often measured in months or years. 1-3 years is common, with multi-year discounts incentivized. B2B SaaS often targets under 1% monthly logo churn (≈12% annual). A curve that initially flattens or improves, then declines — common in products with seasonal or compounding usage.

Question 42 Saas Metrics Arr Churn Ltv

What is bookings?

The total value of contracts signed in a period, recognized when the contract is signed regardless of revenue recognition schedule. Net Promoter Score: % Promoters minus % Detractors among customers surveyed. Often 1-4 weeks for self-serve or transactional, up to a few months for sales-assisted. LTV = ARPU / churn rate (using the same period for both inputs).

Question 43 Saas Metrics Arr Churn Ltv

What is annual contract value vs ARR?

The total recurring revenue a customer is expected to generate over the entire duration of their subscription. Negative churn means existing customers are a net source of new revenue; negative growth means the whole company is shrinking. ACV is for a single contract; ARR sums the recurring portion across the customer base. Cash collected (or billed) for which the service has not yet been delivered; a balance sheet liability.

Question 44 Saas Metrics Arr Churn Ltv

What is a typical SMB SaaS sales cycle?

NDR dips early as customers churn or downgrade, then rises as surviving customers expand — producing a U- or smile-shape over time. Highly variable; high-growth SaaS may spend 50-80% of revenue on S&M, declining as the company matures. Retention rate + Churn rate = 100% (for a simple period). They are complements. Often 1-4 weeks for self-serve or transactional, up to a few months for sales-assisted.

Question 45 Saas Metrics Arr Churn Ltv

What is a "smile-shaped" NDR pattern?

ACV is for a single contract; ARR sums the recurring portion across the customer base. NDR dips early as customers churn or downgrade, then rises as surviving customers expand — producing a U- or smile-shape over time. Starting with a small initial footprint and growing the account over time via expansion revenue. A chart of the percentage of a cohort still active over time since acquisition.

Question 46 Saas Metrics Arr Churn Ltv

What is the Magic Number in SaaS?

Often 6-12 months, sometimes longer for very large or strategic deals. The full set of active customer contracts and their recurring revenue. The ratio of ARR added in a quarter to the sales & marketing spend in the prior quarter. Formula: (Net new ARR quarter × 4) / prior quarter S&M spend. Generally 100%+; below 100% means existing customers are net shrinking.

Question 47 Saas Metrics Arr Churn Ltv

What is expansion revenue?

Additional recurring revenue from existing customers via upsells, cross-sells, or seat expansion. Pricing tied to a customer's consumption of the product, e.g., per API call or GB stored. The percentage of starting ARR retained from existing customers, including both downgrades and expansion. Can exceed 100%. The total recurring revenue a customer is expected to generate over the entire duration of their subscription.

Question 48 Saas Metrics Arr Churn Ltv

What is the difference between logo churn and revenue churn?

The total value of contracts signed in a period, recognized when the contract is signed regardless of revenue recognition schedule. Recurring revenue in the period divided by the number of customers in that period. Logo churn measures lost customers; revenue churn measures lost revenue. They can diverge significantly when account sizes vary. Top-quartile public SaaS companies report NDR above 120% over a trailing 12 months.

Question 49 Saas Metrics Arr Churn Ltv

What is logo churn?

The percentage of customers (logos) lost over a period, regardless of the revenue they paid. Annual Recurring Revenue Selling one product initially, then expanding the account with additional products/modules. ARPA is Average Revenue Per Account; ARPU is Average Revenue Per User. In B2B SaaS, ARPA is usually the relevant figure.

Question 50 Saas Metrics Arr Churn Ltv

What is the "whale" customer?

A very large account that contributes a disproportionate share of ARR; a risk if churned. ACV normalizes revenue to a year; TCV sums all revenue across the full contract term. Often 10-25% of revenue depending on usage-based components and scale. (Customers lost in period / Customers at start of period) × 100%.