SaaS metrics explained: bookings, ARR, ACV and MRR

Bookings, billings, revenue, ARR, ACV, MRR, TCV: they are all “how much is this customer worth”, and they all give different answers. A single contract can be $120,000, $40,000, $20,000 and $0 in the same year, depending on which word you use. That is why teams argue in meetings, and why investors ask you to define terms before they look at the numbers.

This guide traces one contract through every metric, year by year, so you can see exactly where bookings, ACV, ARR, billings, revenue and cash diverge. It then covers MRR and ARR, net and gross revenue retention, the other KPIs worth knowing, and a short list for each stage of company. Every benchmark names its publisher, year and sample, and every calculation has been checked. Churn has its own guide: see subscription churn rate.

The short answers.

• Bookings are the value of a contract the customer has committed to pay, counted when it is signed, whether or not any money has moved.

• Revenue is the part of the contract earned so far over the service period. Billings are what you have invoiced. Cash is what has arrived.

• ACV is the average annual value of a contract. ARR is the annualised recurring revenue from active customers. They are often equal, and they differ in five common cases below.

• TCV is the total value of the contract across its whole term.

Subscription metrics at a glance

One contract, traced through every metric

The contract and our assumptions

A customer signs a three-year contract worth $120,000 in total, starting on 1 July in Year 1. You invoice $40,000 annually in advance, each 1 July, and the customer pays on the invoice date. There are no one-time fees. You report on a calendar year. The payment assumption is a simplification: real customers pay late.

• TCV is $120,000.

• ACV is $120,000 ÷ 3 = $40,000.

• You earn $40,000 ÷ 12 = $3,333.33 a month while the service runs.

The table

Check the totals. Revenue across the four calendar years is $20,000 + $40,000 + $40,000 + $20,000 = $120,000, which equals TCV. Billings are 3 × $40,000 = $120,000. In Year 1 you have been paid $40,000 but only earned $20,000, because six of the twelve months you paid for have not happened yet.

The point of the table is the gap. In Year 1 the same contract is $120,000 of bookings, $40,000 of ARR, $40,000 of billings, $20,000 of revenue and $40,000 of cash. None of those numbers is wrong. They answer different questions.

If a customer reads “$120,000” as the price per year for three years, TCV is $360,000 and ACV and ARR are $120,000. Always state the assumption.

What changes if the contract is ramped, has a one-time fee, or includes usage

• A ramped deal. Suppose the customer pays $30,000 in Year 1, $40,000 in Year 2 and $50,000 in Year 3. TCV is still $120,000 and ACV is still $40,000. But ARR today is $30,000, stepping up to $40,000 and then $50,000 as each year begins. Some companies show the contracted ramp separately as contracted ARR (CARR).

• A one-time fee. Add a $15,000 implementation fee. TCV is now $135,000. ARR is still $40,000, because the fee does not recur. Some companies include the fee in first-year ACV ($55,000), so say which you mean.

• Usage on top of a commitment. The customer commits to $40,000 a year and uses another $6,000. ARR on the commitment is $40,000. Counting the variable run rate gives $46,000. Definitions vary here, so state yours. Stripe’s MRR, for example, excludes metered usage products.

Bookings vs revenue

What counts as a booking

Bookings are the value of a customer contract the customer has committed to pay. a16z defined it in 2015 as the customer’s obligation to pay, which means a letter of intent or a verbal agreement does not count. A $24 million four-year contract counts as $24 million of bookings in the month it is signed.

Companies use three bases, and you need to say which one you report:

• TCV bookings: the full contract value at signing. In our example, $120,000.

• ACV bookings: the first-year or annualised value. $40,000.

• ARR bookings: only the recurring annual portion, leaving out one-time fees, and often called net new ARR. $40,000.

Bookings, billings, revenue and cash

a16z calls billings a better forward-looking indicator than revenue alone, because it is revenue plus the change in the amount invoiced but not yet earned.

A second example. Customer A signs a four-year contract worth $24 million, billed annually from 1 January 2022, so ACV is $6 million. Customer B signs a two-year contract worth $6 million, billed monthly from 1 February 2022, so ACV is $3 million.

• Bookings: $24M + $6M = $30M.

• Billings in 2022: $6M + ($250,000 × 11 months) = $8.75M.

• Revenue earned in 2022: $500,000 × 12 + $250,000 × 11 = $8.75M.

Here billings equal revenue, because both customers are billed in line with service. Switch Customer B to annual billing up front and they would not.

Edge cases that change bookings

• Renewals. Some companies count renewals as bookings, many report them separately.

• Expansions. Usually counted as new bookings when the order form is signed.

• Signed but not live. Counted in bookings and in CARR, but not in ARR until service starts.

• One-time fees. Included in TCV bookings and left out of ARR bookings.

• Usage commitments versus actual usage. Only the commitment is booked.

Which one to report to whom

Your finance team needs revenue and cash. Your sales team lives on bookings. Your board and investors want ARR, net new ARR and retention. Report all of them, label each, and keep the definitions fixed from period to period. How revenue is reported for accounting is a matter for your finance team and auditors.

TCV, ACV and ARR: how they differ

TCV and the “TCV versus ARR” mistake

TCV is the total value of a contract across its full term. It is the headline number on a signed multi-year deal, and it is the easiest to confuse with ARR. A three-year, $120,000 contract is $40,000 of ARR, not $120,000. Quoting TCV as ARR overstates your recurring base by the number of years in the term.

ACV versus ARR

ACV is usually TCV divided by the years in the term, per contract. Stripe defines it differently, as an average across customers, and notes that each business sets its own scope. Both usages exist, so state which one you use.

ARR is the annualised value of recurring revenue from active contracts. It excludes one-time fees. Bessemer describes it as giving full credit for annualised recurring contract value and excluding non-recurring revenue. Mercury notes that multi-year contracts count at their annual value, not their full value.

When ACV and ARR differ

CARR: signed but not live

Contracted ARR (CARR) adds contracts that have been signed but not yet gone live to your ARR. It shows your contracted position, but it is not the revenue you earn today. If you report it, show it as a separate line.

MRR and ARR for SaaS

How to calculate

MRR is the sum of the monthly-normalised recurring value of all active customers. Annual plans are divided by twelve, so a $600 annual plan adds $50 to MRR. ARR is MRR multiplied by 12. a16z warns against annualising a single month of bookings, because it can include non-recurring fees.

Example. You have 50 customers at $100 a month and 10 customers at $500 a month. MRR is 50 × $100 + 10 × $500 = $5,000 + $5,000 = $10,000. ARR is $10,000 × 12 = $120,000.

An MRR roll-forward. Stripe shows how MRR changes in a month: start with $1,000, add $100 of new customers and $50 of expansion, then subtract $40 of contraction, $60 of churn and $5 of currency effects. The result is $1,045. Using that structure every month shows exactly where growth comes from.

What to include and exclude

• Include: recurring subscription fees, recurring add-ons, recurring platform fees, and price increases once they take effect.

• Exclude: one-time setup, implementation, hardware or consulting fees, taxes, free plans, and trials that are not yet paying.

Definitions that vary by company

Usage and metered revenue, discounts, trials, past-due accounts (Stripe counts a past-due subscription as active until it is marked unpaid or cancelled), contracted-but-not-live deals and currency treatment all vary. Pick one policy for each and keep it. Do not call ARR “revenue”: it is a run rate, not money earned.

Net and gross revenue retention

The formulas

SaaS Capital measures NRR as this December’s MRR from customers who were also customers last December, divided by last December’s total MRR. It includes upsells, cross-sells and price increases. GRR is the same but excludes them, so it cannot exceed 100%.

Example. A cohort starts the year at $1,000,000 of ARR. Over twelve months, $60,000 churns, $40,000 contracts and $150,000 expands. New-customer ARR of $200,000 is excluded from both measures.

• NRR = ($1,000,000 − $60,000 − $40,000 + $150,000) ÷ $1,000,000 = 105%.

• GRR = ($1,000,000 − $60,000 − $40,000) ÷ $1,000,000 = 90%.

• Ending ARR including new customers: $1,050,000 + $200,000 = $1,250,000.

Why two companies’ NRR may not be comparable

A 2026 analysis in SaaS Mag compared ten public companies and found five variations in how they calculate NRR: the unit used, the period, whether churned customers stay in at zero, the treatment of services revenue, and the customer cohort. The gap between variations ranged from 0 to 6 points in their examples. Check the formula before comparing your NRR to anyone’s benchmark.

Benchmarks, with their caveats

The other KPIs worth knowing

ARPA and expansion revenue

ARPA is average revenue per account: MRR divided by active accounts. With $50,000 of MRR and 100 accounts, ARPA is $500. Expansion revenue is recurring revenue added from existing customers through upgrades, extra seats and price increases. In the cohort example it was $150,000.

CAC payback and LTV to CAC

CAC payback is acquisition cost divided by the monthly recurring revenue a new customer brings, adjusted for gross margin. As an illustration, suppose CAC is $24,000, ARPA is $2,000 a month and gross margin is 80%. Payback is $24,000 ÷ ($2,000 × 0.80) = 15 months.

LTV, in simple form, is ARPA times gross margin divided by monthly churn. With 2% monthly churn that is $2,000 × 0.80 ÷ 0.02 = $80,000, and LTV to CAC is $80,000 ÷ $24,000 = 3.3. Bessemer’s 2021 guidance suggests investing when LTV to CAC is 3 or higher, and gives CAC payback targets of under 12 months for SMB, under 18 months for mid-market and under 24 months for enterprise. Those are targets, not medians. David Skok points out that many healthy early-stage companies miss them. The inputs in the example are illustrative.

Quick ratio

The SaaS quick ratio is (new MRR + expansion MRR) ÷ (churned MRR + contraction MRR). Using the cohort numbers, (200,000 + 150,000) ÷ (60,000 + 40,000) = 3.5. A target of 4 is often quoted. Tomasz Tunguz used it as a target in 2015, but we could not find a dataset behind it, so treat it as a rule of thumb.

Logo churn and revenue churn

Logo churn counts customers lost. Revenue churn counts money lost, including downgrades. They can tell different stories, and the full formulas and edge cases are in our guide to subscription churn rate.

The short list of KPIs by stage

a16z suggests early-stage companies track monthly revenue, customers and cash burn, and that paid CAC matters more than blended. Mercury recommends focusing on MRR momentum and early retention before product-market fit, then ARR growth, NRR and expansion later. The specific lists below are our own recommendation.

One rule: report every metric with its definition in a footnote, and pick one ARR definition and keep it.

Common mistakes

• Calling ARR “revenue”. ARR is a run rate. Revenue is what you have earned.

• Annualising one month of bookings. The month may include one-time fees.

• Mixing TCV and ACV. A $120,000 three-year contract is $40,000 a year.

• Using blended CAC. a16z says paid CAC matters more.

• Publishing an NRR with no formula. Readers cannot compare it.

• Letting definitions drift. If you change how you count ARR, restate the history.

Frequently asked questions

What is the difference between bookings and revenue?

Bookings are the value of contracts signed. Revenue is the part of a contract you have earned so far over the service period. A $120,000 three-year contract is $120,000 of bookings on a TCV basis in the month it is signed, and $3,333.33 of revenue each month it runs.

Are bookings the same as billings?

No. Billings are what you have invoiced. A multi-year contract is booked once but may be billed annually, quarterly or monthly.

Is a multi-year contract booked all at once?

On a TCV basis, yes. Some companies instead report ACV or ARR bookings, which count only the annual value. State your basis.

What is TCV?

Total contract value: the full value of a contract across its term, including one-time fees if they are part of the contract. TCV = annual value × years of the term.

What is the difference between ACV and ARR?

ACV is the average annual value of a contract. ARR is the annualised recurring revenue from active contracts. They are equal for a flat, recurring one-year or multi-year deal, and they differ with ramps, one-time fees, usage, discounts and contracts not yet live.

Does ARR include one-time fees or usage?

One-time fees are excluded. Usage is treated differently by different companies, so state your policy.

Is ARR the same as revenue?

No. ARR is a run rate. Revenue is what you have earned so far.

What is a good net revenue retention?

SaaS Capital’s 2026 survey of bootstrapped companies at $3M to $20M ARR found a median NRR of 103%. Its 2025 data gives a median of 102% for contract values of $25,000 to $50,000. Both are self-reported, so compare against companies like yours.

Can NRR be above 100%?

Yes, when expansion from existing customers exceeds what you lose. GRR cannot exceed 100%.

What is CAC payback and what is a good one?

The months it takes to earn back the cost of acquiring a customer, adjusted for gross margin. Bessemer’s 2021 targets are under 12 months for SMB, under 18 for mid-market and under 24 for enterprise.

What is a good LTV to CAC ratio?

Bessemer says invest when it is 3 or higher. It is a guideline, and many healthy early-stage companies miss it.

What is the SaaS quick ratio?

(New MRR + expansion MRR) ÷ (churned MRR + contraction MRR). A value of 4 is often quoted as good, though we found no dataset behind it.

What are the most important SaaS KPIs for an early-stage company?

MRR and its growth rate, new customers, logo churn, cash runway and ARPA. See the stage table above.

What is CARR?

Contracted ARR: ARR plus contracts that are signed but not yet live. Show it as its own line.

Key takeaways

• Bookings, billings, revenue and cash measure different things, and one contract can show a different figure in each, so always say which one you mean.

• A three-year, $120,000 contract is $120,000 of TCV, $40,000 of ACV and $40,000 of ARR, which is why quoting TCV as ARR overstates your recurring base.

• ACV and ARR diverge with ramps, one-time fees, usage, discounts and contracts that have not gone live, so write down your policy for each.

• NRR and GRR are only comparable when the formula is, and published benchmarks are mostly self-reported or skewed to certain companies.

• Early on, track a handful of metrics and report every one with its definition, then add efficiency metrics such as CAC payback as you grow.

The best metrics setup is a boring one: fewer numbers, defined once, calculated the same way every month. Write your definitions down, put them where your sales, finance and product teams can all see them, and trace one real contract through the table above. You will probably find a gap that explains an argument you have already had. If you want billing and reporting to use the same numbers, take a look at our reporting and billing tools.