SUCCESS METRICS
Measuring Increased Revenue
ARR/MRR
Revenue is the lifeblood of any company and in the recurring revenue world, it’s measured on an annual and monthly basis. ARR is MRR times 12, and is used to calculate estimated annualized revenue. It is commonly used to assess the overall health and financial performance of a subscription business.
MRR represents the predictable and recurring revenue from customers on a monthly basis, and excludes one-time fees or variable charges. It us used to assess revenue stability and the growth rate of a subscription business.
Customer Lifetime Value (LTV)
Customer Lifetime Value is the amount of revenue a business can expect to generate over the entire relationship with a customer. It calculates the net profit contribution from a customer, considering factors such as repeat purchases, average order value, retention rate and acquisition cost.
LTV is important in revenue forecasting, optimizing Customer Acquisition Cost (CAC), performing segmentation and targeting tasks, increasing retention and loyalty, allocating investment dollars and valuing a business.
Customer Churn
Measuring customer attrition, churn is the rate at which customers stop using a company’s products or services. Churn can have a major impact on financial performance and growth and is a lagging indicator of a company’s product-market fit. Low churn increases LTV and long-term profitability, while high churn does the opposite.
Bonus points for Revenue Churn, which measures the lost revenue associated with churned customers.
Upsell/cross-sell
Upsell and cross sell metrics measure the effectiveness and success of those strategies and provide insights into the impact of these techniques on revenue generation and customer expansion.
Metrics could include upsell or cross-sell conversion rates (offers accepted / offers offered), average revenue per customer (ARPC), average order value (AOV), repeat purchase rate and CLV impact.
