SaaS Metrics Every Indie Hacker Should Track: MRR, Churn, LTV & CAC

Introduction

Getting a solid understanding of core SaaS metrics is essential for making informed decisions. For simple indie projects, tracking just a few core metrics consistently can provide a lot of insight. Unlike traditional software licensing, SaaS businesses generate recurring revenue, which means the health of your business isn’t just about how many customers you acquire—it’s about how many you keep and how much they’re worth over time.

This guide breaks down the five most critical metrics for indie SaaS founders, explains why they matter, and shows you how to calculate and act on them.

---

MRR & ARR

Monthly Recurring Revenue (MRR)

MRR stands for Monthly Recurring Revenue. It’s the total predictable revenue you expect to receive each month from all active subscriptions.

Formula:

MRR = Sum of all active monthly subscription revenue

Example:

• 10 customers on a $99/month plan = $990
• 5 customers on a $49/month plan = $245
• 3 customers on a $199/month plan = $597
• Total MRR = $1,832

Why it matters: MRR gives you a snapshot of your business’s predictable income. It’s the single best indicator of your SaaS business’s health and growth trajectory.

Annual Recurring Revenue (ARR)

ARR stands for Annual Recurring Revenue. It’s simply your MRR projected over 12 months.

Formula:

ARR = MRR × 12

Example: If your MRR is $1,832, your ARR is $1,832 × 12 = $21,984

Why it matters: ARR is useful for annual contracts, investor conversations, and understanding your yearly trajectory. It’s also easier to compare against industry benchmarks, which are often quoted annually.

Tracking tip: Use Stripe’s built-in reports, or automate this with a simple script using their API. Many founders use tools like Baremetrics or ChartMogul to automatically calculate MRR and track cohorts.

---

Churn

What is Churn?

Churn is the percentage of customers (or revenue) you lose in a given period. It’s often expressed as a monthly or annual rate. There are two types:

Customer Churn (Logos Churn)

• The percentage of individual customers who cancel their subscriptions
• Formula: (Customers lost in period / Customers at start of period) × 100

Revenue Churn (MRR Churn)

• The percentage of recurring revenue lost (includes downgrades)
• Formula: (Revenue lost in period / Revenue at start of period) × 100

Example:

• Start of month: 100 customers, $10,000 MRR
• During month: 3 customers cancel, 2 downgrade from $99 to $49 (losing $100/month in revenue)
• Customer churn = (3 / 100) × 100 = 3%
• Revenue churn = ($100 / $10,000) × 100 = 1%

Benchmarks & Why It Matters

Lower churn is always better. Healthy SaaS businesses typically see:

• B2B SaaS: 5-7% annual churn (or ~0.4-0.6% monthly)
• B2C SaaS: 5-10% monthly churn
• Vertical SaaS: 3-5% monthly churn

High churn means you’re losing more customers than you’re gaining, making growth impossible. Even small reductions in churn have enormous impacts on long-term revenue.

Reducing Churn

• Improve onboarding: Help customers find value faster
• Gather feedback: Exit surveys from cancelled accounts reveal pain points
• Segment by cohort: Track which customer segments churn most
• Reduce friction: Simplify billing, improve support response times

---

Customer Acquisition Cost (CAC)

What is CAC?

CAC stands for Customer Acquisition Cost. It’s the total cost to acquire a single paying customer, including all marketing and sales expenses.

Formula:

CAC = Total marketing & sales spend in period / Number of new customers acquired in period

Example:

• Ad spend: $1,000
• Marketing tool subscriptions: $300
• Sales wages allocated: $500
• Total spend: $1,800
• New customers acquired: 6
• CAC = $1,800 / 6 = $300 per customer

What to Include in CAC

• Advertising spend (Google Ads, Facebook, etc.)
• Marketing tool subscriptions (email, CRM, analytics)
• Wages for sales/marketing staff
• Content creation costs
• Affiliate commissions
• Event sponsorships

Note: Exclude one-time overhead (website development, logo design) unless amortizing over time.

Why It Matters

CAC tells you how much you need to spend to acquire a customer. If your CAC is high relative to your customer value, your business model may not be sustainable. Many indie founders make the mistake of ignoring this metric and acquiring customers at a loss.

Optimizing CAC

• Test channels: Some channels may have much lower CAC than others
• Improve conversion: Better landing pages = lower CAC for the same spend
• Track by source: Know which channels are most efficient
• Viral/referral loops: Aim for organic growth to reduce CAC

---

Lifetime Value (LTV)

What is LTV?

LTV stands for Customer Lifetime Value. It’s the total revenue you expect to generate from a single customer over the entire relationship.

Simple LTV Calculation

The simplest model assumes a customer stays until they eventually churn:

Formula:

LTV = Monthly revenue per customer / Monthly churn rate

Example:

• Monthly revenue per customer (ARPU): $50
• Monthly churn rate: 5% (0.05)
• LTV = $50 / 0.05 = **$1,000**

This means you expect to generate $1,000 per customer over their lifetime.

More Detailed LTV (Including Gross Margin)

A more realistic calculation accounts for the cost of service delivery:

Formula:

LTV = (ARPU × Gross Margin) / Monthly churn rate

Example:

• ARPU: $50
• Gross margin: 70% (costs of delivery = 30%)
• Monthly churn: 5%
• LTV = ($50 × 0.70) / 0.05 = $700

LTV with Discount Rate

For a precise calculation, especially for longer time horizons, use a discount rate to account for the time value of money:

Formula:

LTV = Σ (Monthly profit / (1 + discount rate)^month)

This is more complex but more accurate for investors. Most indie founders use the simple version.

Why It Matters

LTV tells you how much a customer is worth over their lifetime. High LTV enables you to spend more on acquisition while remaining profitable.

---

LTV:CAC Ratio

Why This Ratio Matters

The LTV:CAC ratio compares customer lifetime value to the cost of acquiring them. It’s one of the most important metrics for determining business sustainability.

Formula:

LTV:CAC Ratio = LTV / CAC

Interpreting the Ratio

• < 1x: You’re spending more to acquire customers than they’re worth. Unsustainable. Stop growth and reduce CAC or improve LTV.
• 1-3x: Growth is eating into profitability. Acceptable early-stage, but work on improving unit economics.
• > 3x: Healthy ratio. You’re spending $1 to acquire customers worth $3+. Sustainable.
• > 5x: Excellent unit economics. You have runway to invest more in growth.

Example: Simple Calculation

• Monthly price: $25
• Monthly churn: 3% (0.03)
• LTV = $25 / 0.03 = **$833**
• CAC: $250
• LTV:CAC = $833 / $250 = 3.33x ✓ Acceptable

---

Measuring & Reporting

Setting Up Tracking

Step 1: Choose your tools

• Spreadsheet approach: Simple Google Sheets for manual entry (works for < 100 customers)
• Stripe API: Pull data automatically with a simple script
• Tools: Baremetrics, ChartMogul, Profitwell

Step 2: Create a dashboard

Weekly metrics to track:
- MRR (current, % change vs. last week, % growth YoY)
- Customer count
- Monthly churn rate
- CAC (by channel)
- LTV
- LTV:CAC ratio

Step 3: Segment your data

• By plan: Do certain pricing tiers churn more?
• By acquisition channel: Which channels produce the best customers?
• By cohort: How do customers acquired in different months compare?
• By customer type: B2B vs. B2C, industry, company size, etc.

Segmentation reveals patterns. You might discover that Product Hunt customers have 2x better LTV than Google Ads customers, for example.

Frequency & Alerts

• Track weekly: Monitor trends and catch problems early
• Review monthly: Deeper analysis, cohort comparisons
• Set thresholds: Alert yourself if churn exceeds 5% or MRR growth drops below 5%

Simple Google Sheets Template

Create columns for:

• Date
• MRR
• Active customers
• New customers
• Churned customers
• Monthly churn %
• Ad spend
• CAC
• LTV
• LTV:CAC ratio

Plot a line chart of MRR and churn to visualize trends.

---

Key Takeaways

Metric	Definition	Why It Matters	Target
MRR	Monthly recurring revenue	Your predictable income	Growing month-over-month
ARR	MRR × 12	Annual projection	Industry benchmark
Churn	% customers/revenue lost	Business sustainability	< 5-7% annually
CAC	Cost per new customer	Acquisition efficiency	Varies by channel
LTV	Total customer revenue over lifetime	Customer value	3x+ your CAC
LTV:CAC	LTV divided by CAC	Unit economics health	> 3x for sustainability

---

Final Thoughts

Start tracking these metrics as soon as you have a few paying customers. Simple, consistent measurement beats over-engineering: you’ll be able to spot trends and make better decisions.

Many successful indie hackers check these numbers weekly and use them to guide decisions about pricing, product changes, and marketing spend. The discipline of tracking compounds over time.

Common mistakes to avoid:

• Ignoring churn and focusing only on growth
• Not segmenting data (all customers are not equal)
• Calculating CAC without including all costs
• Setting goals without understanding benchmarks
• Using outdated data (track at least weekly)

Action items:

1. Calculate your current MRR, churn, CAC, and LTV today
2. Log these metrics in a simple spreadsheet (or tool)
3. Set a weekly review cadence (every Monday, for example)
4. Identify which metric is your biggest leverage point and focus there first

---

Resources

• Stripe Reporting Guide
• Baremetrics SaaS Metrics Guide
• The SaaS Metrics Bible
• ARR vs. MRR Explained
• ChartMogul Cohort Analysis