Several important metrics (which may or may not be new to companies shifting to subscription) are:
- Annual contract value (ACV): The value recognized in a single year of a multi-year subscription.
- Annual/monthly recurring revenue (ARR/MRR): The sum of all subscription revenue in a year/month.
- Billings: The number on the invoice that goes out the door to the customer, billings occur when the actual invoice is sent, based on the contract terms.
- Customer acquisition cost (CAC): The cost to acquire a new customer (e.g., marketing expenses), which in turn starts a new recurring revenue stream.
- Lifetime value of a customer (LTV): the total expected revenue over the lifetime of a customer relationship. The LTV must be larger than the CAC.
- Revenue retention: revenue change for existing customers over a period of time.