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Guide · ~9 min read
When a partner opens your model, they run a handful of numbers in their head before reading a word of your deck. Here are the seven that matter most — each with the standard definition, the formula, and a worked figure from a real model — plus the honest caveats on what they don't tell you.
The trap isn't that these metrics are hard; it's that founders compute them on a separate tab, using slightly different definitions than their investor, so the metrics contradict the P&L. The fix is to compute every metric from the same build as the statements. All the worked numbers below come from year one of the fictional sample company in the worked report unless noted.
What it answers: if you never signed another customer, would your revenue grow or shrink? It measures expansion minus churn on the existing base.
Formula: NRR = (beginning ARR + expansion ARR − churned ARR) / beginning ARR. It excludes new logos on purpose — new sales can't paper over a leaky bucket.
Beginning ARR $1,802,508, expansion +$537,880, churn −$204,792 (year 2). NRR = (1,802,508 + 537,880 − 204,792) / 1,802,508 = 118.5%. The base grows ~18.5% a year on its own before a single new sale.
Caveat: NRR above 120% is genuinely strong; below 100% means the base is shrinking and new sales are running up a down escalator. It's the single number most predictive of durable growth — and the one investors most often ask you to recompute their way.
What it answers: how much do you keep before any expansion? GRR caps at 100% and strips out the flattering effect of upsell.
Formula: GRR = (beginning ARR − churned ARR) / beginning ARR.
(1,802,508 − 204,792) / 1,802,508 = 88.6%. So ~11% of the base churns each year, and expansion more than fills the hole — which is why NRR (118.5%) sits well above GRR.
Caveat: a high NRR with a low GRR (say 120% / 75%) is a warning, not a win — it means you're losing a lot of customers but a few big accounts are expanding hard. Investors look at the pair together.
What it answers: how much does one customer cost to acquire, and how many months of gross profit does it take to earn that back?
Formula: CAC = sales & marketing spend / net-new logos. CAC payback = CAC / (monthly ARPA × gross margin).
CAC = $506,000 S&M / 46 new logos = $11,000. Monthly gross profit per customer = $2,400 ARPA × 74% margin = $1,776. Payback = 11,000 / 1,776 = 6.2 months.
Caveat: payback uses gross profit, not revenue — a common overstatement is dividing CAC by ARPA and ignoring margin, which flatters payback. Under 12 months is generally healthy for seed/Series A B2B SaaS; under 6 is excellent.
What it answers: for every dollar spent acquiring a customer, how many dollars of gross profit come back over the customer's life?
Formula: LTV = (monthly ARPA × gross margin) / monthly revenue churn. LTV:CAC = LTV / CAC.
Monthly gross profit $1,776 ÷ 1.0% monthly revenue churn = LTV ~$177,600. LTV:CAC = 177,600 / 11,000 = 16.1×.
Caveat: LTV:CAC is the most abused metric in fundraising decks. It's hypersensitive to the churn assumption — halve churn and LTV doubles — and it assumes today's retention holds for years. Investors discount very high ratios heavily; a defensible 3×–5× with strong retention beats a fragile 16× built on an optimistic churn input. Show the churn assumption plainly.
What it answers: how efficiently did last year's sales & marketing spend convert into new recurring revenue?
Formula: magic number = net-new ARR this year / prior-year S&M spend.
Year 2 net-new ARR $2,500,576 ÷ prior-year S&M $506,000 = 4.9 (a magic number above ~0.75 is usually taken as "keep spending").
Caveat: a very high magic number can mean you're under-investing in growth, not just spending efficiently. Read it next to your growth rate, not alone.
What it answers: how many dollars did you burn to add one dollar of net-new ARR? It's the bluntest efficiency screen there is.
Formula: burn multiple = net cash burned / net-new ARR (both for the same period). Below ~1.5× is efficient; below 1× is excellent; the sample turns cash-flow positive, so its burn multiple falls to 0 in later years.
We treat this and Rule of 40 in depth in their own guide.
What it answers: is your growth-plus-profitability at a level a public-market investor would reward?
Formula: Rule of 40 = year-over-year ARR growth % + free-cash-flow margin %. The target is ≥ 40.
Year 3: ARR growth 101.2% + FCF margin 14.9% = 116. Early companies routinely blow past 40 because growth is extreme; the number gets meaningful as growth normalizes.
Caveat: the Rule of 40 is a late-stage screen. Applying it to a pre-seed company with 300% growth produces a huge, meaningless number. Investors know this — don't lead with it early.
| Metric | Sample (yr 1–3) | Rough "good" |
|---|---|---|
| NRR | 118.5% | ≥ 110% B2B |
| GRR | 88.6% | ≥ 85% |
| CAC payback | 6.2 → 5.5 mo | < 12 mo |
| LTV:CAC | 16.1× | > 3× (defensible) |
| Magic number | 4.9 (yr 2) | > 0.75 |
| Rule of 40 | 116 (yr 3) | ≥ 40 (late stage) |
These are illustrative outputs of one deterministic model, not benchmarks or targets for your company. "Good" ranges are widely-cited rules of thumb, not guarantees.
The reason to compute these from the same build as your statements is defensibility. If your metrics tab says NRR 118% but your revenue build implies churn that doesn't match, a partner will find the gap in two minutes. When every metric is derived from the exact ARR bridge and S&M line in the P&L, there's nothing to catch.
ModelKit's metrics tab is wired to the same revenue build and P&L as the statements, so they can never contradict each other. Drop your numbers in the cockpit; every metric recomputes.
Request the kit — $149 See the metrics tabEducational material only — not investment, legal, financial, accounting, or tax advice, and not a valuation opinion. Figures are illustrative outputs of a deterministic model; benchmark ranges are common rules of thumb, not targets.