Subscription Metrics

When to Use This Skill

Use this skill when you need to:

• Calculate core subscription business metrics (MRR, ARR, churn, LTV, CAC)
• Create a subscription metrics dashboard or report
• Analyze the health of a recurring revenue business
• Identify trends and areas for improvement in subscription performance

DO NOT use this skill for one-time purchase businesses, general financial reporting, or ad hoc revenue calculations. This is for recurring revenue business models.

Core Principle

SUBSCRIPTION BUSINESSES LIVE AND DIE BY RETENTION — MRR GROWTH MEANS NOTHING IF CHURN IS EATING IT FROM BELOW.

Phase 1: Data Collection

Required Inputs

GATE: Do not proceed without MRR, subscriber count, new subscribers, and churned subscribers.

Phase 2: Core Metrics

Metric Calculations

## Subscription Metrics Report: [Month/Year]

### Revenue Metrics
| Metric | Value | Formula |
|--------|-------|---------|
| MRR | $[X] | Sum of all active subscriptions |
| ARR | $[X] | MRR x 12 |
| New MRR | $[X] | New subscriber revenue this month |
| Expansion MRR | $[X] | Upgrade/add-on revenue |
| Churned MRR | $[X] | Lost revenue from cancellations |
| Net New MRR | $[X] | New + Expansion - Churned |
| MRR Growth Rate | [X]% | Net New MRR / Previous MRR |
| ARPU | $[X] | MRR / Active subscribers |

### Customer Metrics
| Metric | Value | Formula |
|--------|-------|---------|
| Active subscribers | [X] | Current paying customers |
| New subscribers | [X] | Acquired this month |
| Churned subscribers | [X] | Cancelled this month |
| Net subscriber growth | [X] | New - Churned |
| Logo churn rate | [X]% | Churned / Start-of-month subscribers |
| Revenue churn rate | [X]% | Churned MRR / Start-of-month MRR |
| Net revenue retention | [X]% | (MRR - Churned + Expansion) / Start MRR x 100 |

### Unit Economics
| Metric | Value | Formula |
|--------|-------|---------|
| CAC | $[X] | Marketing spend / New subscribers |
| LTV | $[X] | ARPU / Monthly churn rate |
| LTV:CAC ratio | [X]:1 | LTV / CAC |
| Payback period | [X] months | CAC / ARPU |
| Gross margin | [X]% | (MRR - COGS) / MRR |

Phase 3: Health Assessment

Benchmark Comparison

## Health Check

| Metric | Your Value | Healthy Benchmark | Status |
|--------|-----------|-------------------|--------|
| Monthly churn | [X]% | <5% (SMB), <2% (Enterprise) | [Good/Warning/Critical] |
| Net revenue retention | [X]% | >100% | [Good/Warning/Critical] |
| LTV:CAC | [X]:1 | >3:1 | [Good/Warning/Critical] |
| Payback period | [X] months | <12 months | [Good/Warning/Critical] |
| MRR growth rate | [X]% | >10% MoM (early stage) | [Good/Warning/Critical] |
| Gross margin | [X]% | >70% (SaaS) | [Good/Warning/Critical] |

Trend Analysis

## 6-Month Trend

| Metric | M-5 | M-4 | M-3 | M-2 | M-1 | Current | Trend |
|--------|-----|-----|-----|-----|-----|---------|-------|
| MRR | | | | | | | ↑↓→ |
| Churn % | | | | | | | ↑↓→ |
| New MRR | | | | | | | ↑↓→ |
| LTV:CAC | | | | | | | ↑↓→ |

Recommendations

Based on the health check, provide 3-5 specific actions:

## Priority Actions

1. **[Action]** — [Why this matters based on the data]
2. **[Action]** — [Why]
3. **[Action]** — [Why]

Phase 4: Deliverable

## Report Delivery

metrics/
└── subscription-metrics-[YYYY-MM].md

Include: All calculated metrics, health assessment, trend data (if available), and prioritized recommendations.

Example: SaaS with 200 Subscribers

Data: MRR $5,800, 200 subscribers, 15 new, 8 churned, $400 expansion, $2,100 marketing spend.

Results: ARPU $29, logo churn 4%, revenue churn 3.4%, NRR 104%, CAC $140, LTV $853, LTV:CAC 6.1:1, payback 4.8 months.

Assessment: Healthy LTV:CAC and payback period. Churn at 4% is acceptable for SMB but worth reducing. NRR above 100% means expansion revenue covers churn — strong signal. Priority: reduce churn from 4% to 3% which would increase LTV by 33%.

Anti-Patterns

• Calculating LTV with revenue churn instead of logo churn — use the right churn type for the right metric. Revenue churn for revenue LTV.
• Ignoring expansion revenue — net revenue retention is a more meaningful metric than gross churn alone
• Monthly metrics without trends — one month of data is a snapshot, not insight. Track at least 3-6 months for trends.
• Blending free and paid users — only include paying subscribers in these calculations. Free users are a different funnel stage.
• Using averages when cohorts differ — if you have multiple pricing tiers, calculate metrics per tier. Blended averages hide problems.

Recovery

• No historical data: Start tracking now. Create the first report as a baseline and commit to monthly updates.
• Very early stage (< 50 subscribers): Small sample sizes make percentages unreliable. Report raw numbers alongside percentages and note the sample size caveat.
• Churn data unavailable: Use net subscriber change as a proxy. Set up proper churn tracking immediately — this is your most important metric.
• Freemium model: Separate free and paid metrics completely. Track free-to-paid conversion rate as an additional KPI.