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SaaS businesses build their financial models around recurring revenue. Annual Recurring Revenue (ARR) is the annualized value of all active subscription contracts at a point in tim...
Churn is the leak in the SaaS bucket, and measuring it precisely is essential. Gross MRR churn is the percentage of recurring revenue lost in a period from cancellations and downgr...
Customer Lifetime Value (LTV or CLV) is the total recurring revenue a customer is expected to generate over the entire duration of their subscription. The simplest formula is \(\te...
Net new MRR in any period combines four movements: new MRR from new logos, expansion MRR from existing customers, contraction MRR from downgrades, and churn MRR from cancellations....
The Rule of 40 frames the central tension in SaaS between growth and profitability: \(\text{growth rate (\%)} + \text{profit margin (\%)} \geq 40\). A company growing 50% with a 0%...
Cohort analysis groups customers by a shared start period and tracks their behavior over time. The cohort retention chart—a grid with cohorts as rows and months since signup as col...