Purpose
Turn raw revenue, customer, and cost inputs into a clean set of correctly-calculated SaaS metrics — ARR, NRR, GRR, CAC, LTV, LTV:CAC, CAC payback, and contribution margin — each paired with benchmark context and plain-language commentary a non-finance stakeholder can act on. Eliminates ambiguity over which formula to use and what a given number actually signals about the business.
When to Use
Invoke this skill when the user asks to:
- Calculate ARR, NRR, GRR, CAC, LTV, or contribution margin from raw data
- Interpret what their SaaS metrics mean or whether they're healthy
- Prepare a metrics summary for a board deck, investor update, or QBR
- Diagnose why unit economics look weak (high CAC, low LTV:CAC, slow payback)
- Translate churn, expansion, and cost data into a plain-language narrative
- Benchmark their metrics against SaaS norms for their stage or ACV
Inputs Required
Before starting, collect:
- Recurring revenue data: Starting and ending MRR/ARR for the period, plus new, expansion, contraction, and churned revenue if available
- Customer counts: Starting customers, new customers acquired, and churned customers in the period
- Sales & marketing spend: Total S&M cost for the period used to acquire customers
- Gross margin inputs: COGS or gross margin % (hosting, support, third-party fees) to compute contribution margin
- Average customer lifetime or monthly churn rate: Used to derive LTV — either directly or from churn
- Period length: Monthly, quarterly, or annual — so annualization is applied correctly
- Company context: Stage, ACV band (SMB / mid-market / enterprise), and business model (self-serve vs. sales-led)
If contribution margin inputs are missing, default gross margin to 75% (typical SaaS) and state the assumption. If customer lifetime is not given, derive it as 1 ÷ monthly churn rate.
Instructions
Step 1: Establish the Data Foundation
Before calculating, confirm the period and normalize units.
- Convert all figures to a consistent basis (monthly vs. annual) and note the period length
- Flag any input that is missing, internally inconsistent (e.g., ending MRR ≠ starting + new + expansion − contraction − churn), or implausible
- If a required input is missing, apply the default and record it explicitly so the reader sees every assumption
Step 2: Calculate Recurring Revenue Metrics
- ARR = ending MRR × 12 (or ending ARR directly). Report starting ARR, ending ARR, and net new ARR for the period.
- GRR (Gross Revenue Retention) = (starting MRR − contraction − churn) ÷ starting MRR. Caps at 100% — measures how much revenue you keep before expansion.
- NRR (Net Revenue Retention) = (starting MRR − contraction − churn + expansion) ÷ starting MRR. Can exceed 100% — the single most-watched SaaS health metric.
- Annualize retention only when the period is not already annual; note the conversion.
Step 3: Calculate Acquisition Economics
- CAC = total S&M spend ÷ new customers acquired in the period. If blended vs. paid CAC matters, note which S&M scope was used.
- CAC Payback (months) = CAC ÷ (new customer average MRR × gross margin %). Measures how long until an acquired customer repays their acquisition cost.
- State clearly whether CAC is fully-loaded (includes salaries, tools, overhead) or ad-spend only, since this materially changes interpretation.
Step 4: Calculate Lifetime Value and Ratio
- Customer lifetime (months) = 1 ÷ monthly churn rate (or use provided lifetime).
- LTV = average customer MRR × gross margin % × customer lifetime. Always margin-adjusted — never revenue-based LTV, which overstates value.
- LTV:CAC ratio = LTV ÷ CAC.
- Do not report LTV without the gross-margin adjustment; call it out if the user's prior LTV was revenue-based.
Step 5: Calculate Contribution Margin
- Contribution margin = recurring revenue − variable delivery costs (COGS + variable support/hosting) − variable S&M attributable to that revenue, expressed as both a dollar figure and % of revenue.
- Distinguish gross margin (revenue − COGS) from contribution margin (also nets variable acquisition/servicing costs) so the reader knows which lever moves it.
Step 6: Benchmark and Interpret Each Metric
For every metric, deliver a one-to-two sentence plain-language read using these reference bands:
- NRR: <90% concerning; 90–100% acceptable; 100–110% good; 110%+ strong (best-in-class enterprise)
- GRR: <80% concerning (SMB), 90%+ healthy (enterprise)
- LTV:CAC: <1 unsustainable; 1–3 improvable; 3–5 healthy; >5 possibly under-investing in growth
- CAC Payback: <12 months strong; 12–18 months typical; >18–24 months concerning for most models
- Gross margin: 70–80% typical SaaS; <70% signals delivery-cost drag
- State whether the result is healthy, watch-list, or a red flag — and name the one input most responsible for it.
Step 7: Synthesize the Narrative
Close with a 3–5 sentence executive read: what the numbers say about the business overall, the single strongest signal, the single biggest risk, and the one metric to fix first.
Output Format
- Structure: Metrics table (metric, value, benchmark, health rating) followed by per-metric commentary, then an executive summary
- Length: 700–1,000 words
- Format: A results table + short interpretive paragraphs per metric + a closing narrative
- Sections: Assumptions & Data Notes → Metrics Summary Table → Metric-by-Metric Interpretation → Executive Read (what to fix first)
- Tone: FP&A specialist — precise, plain-spoken, quantitative, no hype; explains finance concepts without jargon walls
Quality Checklist
Before delivering output, verify:
- [ ] Every metric shows its formula inputs or an explicit assumption — no unexplained numbers
- [ ] LTV is margin-adjusted (not revenue-based) and NRR/GRR are calculated separately
- [ ] Each metric has a benchmark band and a health rating (healthy / watch / red flag)
- [ ] All defaults applied (e.g., 75% gross margin) are stated in the Assumptions section
- [ ] The period basis is consistent and annualization is noted wherever applied
- [ ] The Executive Read names one specific metric to fix first — not a generic summary
Notes
- The most common error in SaaS metrics is unadjusted LTV — always multiply by gross margin, or LTV:CAC will look 25–30% healthier than reality.
- NRR and GRR tell different stories: high NRR can mask heavy logo churn offset by expansion. Report both when contraction/churn data exists.
- If ending MRR doesn't reconcile with the revenue movement components, flag it before calculating — a bridge error corrupts every downstream metric.
- Blended CAC (all customers, including organic) understates paid acquisition cost; note which scope was used so comparisons stay honest.
How to use this skill
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- Drag this file into a new chat, or copy and paste its contents
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