SaaS metrics: ARR, churn and net retention

Boards, Series B diligence rooms, and public SaaS earnings calls all orbit the same picture: starting ARR, plus new and expansion, minus contraction and churn, equals ending ARR. If you can read that bridge, you can tell whether growth is real.

Unit economics ask whether one customer pays back CAC. Here you ask whether the base of customers is compounding. Efficiency metrics then judge how much cash that compounding costs. Product retention is the behavioral twin of revenue retention.

This page is the map. Each concept page does the arithmetic. Rough mid-2020s intuition: public-cloud NRR often sits in the 110–130%+ range, GRR in the 85–95% band, and annual GRR below about 80% usually means the product is weak no matter how good new sales look.

Concepts in this section

Step	Concept	What it answers
1	ARR and MRR	What counts as recurring stock?
2	The ARR bridge	Where did this year's growth actually come from?
3	Bookings vs revenue	Signed, invoiced, or recognized?
4	Logo vs revenue churn	Did we lose customers, or dollars?
5	GRR and NRR	Is the existing base shrinking or compounding?
6	SaaS quick ratio	How many dollars do we add per dollar we lose?

A number you should be able to do cold, because it shows up everywhere:

Start $10M + $3M new + $2M expansion − $0.5M contraction − $1M churn
  = $13.5M ending, $3.5M net new, 35% growth
GRR = 85%    NRR = 105%    Quick ratio ≈ 3.33

In interviews, expect: define NRR vs GRR, walk the bridge, explain bookings vs revenue, and sanity-check a quick ratio. Bring a calculation, not a slogan.

You do not need to be VP Finance. You do need to notice when the roadmap ignores that NRR is the growth strategy (seats, usage meters, modules), when a "successful" launch adds new ARR while GRR falls, and when sales books multi-year deals that finance cannot recognize this quarter. Support and infra cost that scale with logos that revenue churn says are worthless are a product problem, not a staffing one.

A $120k annual contract signed and prepaid in March is a $120k booking and billing in March, and $10k revenue per month as deferred revenue burns down. If someone celebrates "revenue" that month, ask which clock they mean.

Common mistakes

One vanity growth %. Without the bridge you cannot see the $1.5M leak.
Mixing clocks. Bookings, billings, and revenue are not interchangeable.
Unlabeled "3% churn." Monthly versus annual changes the verdict.
NRR without GRR. Expansion can hide a product that does not keep people.

Key takeaways

ARR/MRR measure the stock of recurring value. Growth is the bridge, not a slogan.
Bookings ≠ billings ≠ revenue.
Logo churn and revenue churn diverge when customer sizes differ.
GRR ignores expansion and is capped at 100%. NRR includes expansion and can exceed 100%.
Quick ratio is a leak detector. Pair it with unit economics.