Free tool SaaS metrics calculator: Rule of 40, NRR, Burn Multiple and more
Six efficiency metrics that investors and finance teams use for subscription businesses, in one form. Pick a metric, enter the few numbers it needs, and read the result with the definition its originator published, not a made-up benchmark.
- Six metrics
- Sourced definitions
- Runs locally
Pick a metric and enter its inputs
Each metric has its own inputs. Use the same period for everything in one calculation; amounts can be in any currency.
Or MRR a year ago; growth is the year-over-year change.
Same measure as above, today.
Total revenue for the 12 months you measure profit over.
EBITDA (Feld's choice) or free cash flow. Use a minus sign for a loss, e.g. −1,500,000.
MRR or ARR from customers you had at the start of the period, e.g. 12 months ago.
Upgrades and extra seats from those customers during the period.
Downgrades from those customers.
Revenue of those customers who cancelled.
From new customers in the period.
From existing customers upgrading.
From existing customers downgrading.
From customers who cancelled.
Cash out minus cash in (e.g. for a quarter). Negative if you generated cash.
New + expansion − contraction − churned ARR, same period. Can be negative.
Cash and equivalents available now.
Average cash decrease per month (recent 3 months). Negative if cash is growing.
Quarterly subscription revenue for quarter X − 1.
Quarterly subscription revenue for quarter X.
Total S&M expense in quarter X − 1.
Rule of 40 score
+42.5%
Revenue growth rate + profit margin.
Net revenue retention (NRR)
—
(Start + expansion − contraction − churn) ÷ start.
SaaS Quick Ratio
—
(New + expansion MRR) ÷ (churned + contraction MRR).
Burn Multiple
—
Net burn ÷ net new ARR: cash burned per dollar of ARR added.
Runway (months)
—
Cash ÷ monthly net burn.
Magic number
—
(This quarter − previous quarter revenue) × 4 ÷ previous quarter S&M.
Share these inputs: the values go after the # in the link, so they never reach a server.
https://tapcub.com/tools/saas-metrics-calculator
Version v1.0Updated Update history
What each metric measures, and who defined it
All six are ratios of two things you already track. They answer different questions, so read the one that matches your decision.
Rule of 40
Growth rate + profit margin ≥ 40%. Brad Feld wrote it up in a 2015 post, having heard it from a late-stage investor; he used year-over-year MRR growth and EBITDA margin. 30% growth at 12.5% margin scores 42.5%.
NRR and GRR
What a starting group of customers pays you at the end of the period. NRR counts expansion and can exceed 100%; GRR counts only losses. Stripe's revenue retention uses the same cohort logic. No single originator, so no threshold here.
SaaS Quick Ratio
Revenue added for every unit lost: (new + expansion) ÷ (churn + contraction). Introduced by Mamoon Hamid in a SaaStr talk, where he called 4 or more quite desirable.
Burn Multiple
Net burn ÷ net new ARR. David Sacks proposed it in April 2020: about 2× is reasonable early on, 3× or more is a warning sign, and it should fall as a company matures.
Runway
Cash ÷ monthly net burn: how many months until the money runs out if nothing changes. A standard definition with no single author; it is only as good as the burn estimate.
Magic number
Annualised revenue added per dollar of last quarter's sales and marketing. Formula from Lars Leckie's 2008 post, with 0.75 as his line between stepping back and accelerating spend.
Thresholds on this page are quoted only where the person who defined the metric gave one, with a link. Other benchmarks you see online come from surveys with their own samples and years.
Three steps
One metric at a time; the inputs for each are kept when you switch.
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1
Pick the question
Growth versus profit: Rule of 40. Health of the existing base: NRR / GRR. Growth quality: Quick Ratio. Capital efficiency: Burn Multiple or magic number. Survival: runway.
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2
Enter the period's numbers
Rule of 40 uses 12 months; Burn Multiple and magic number usually a quarter; Quick Ratio a month. Keep every input in the same period.
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3
Read the note
The note under the result gives the originator's own reading where one exists. Share the link to keep the inputs.
Six formulas and their sources
Each formula as published by the person or document linked above. Where definitions differ in practice (EBITDA or free cash flow, MRR or ARR), the calculator accepts either as long as you stay consistent.
- NRR and GRR measure only customers who existed at the start; new customers stay out
- Burn Multiple and magic number both relate spend to recurring revenue added, but the magic number counts only sales and marketing spend
- The Quick Ratio here leaves reactivation out, as in Hamid's description; the MRR and ARR calculator uses the same definition
| Metric | Formula | Source |
|---|---|---|
| Rule of 40 | growth rate + profit margin ≥ 40% | Brad Feld, 2015 |
| NRR | (start + expansion − contraction − churn) ÷ start | Cohort revenue retention |
| GRR | (start − contraction − churn) ÷ start | Cohort revenue retention |
| SaaS Quick Ratio | (new + expansion) ÷ (churn + contraction) | Mamoon Hamid |
| Burn Multiple | net burn ÷ net new ARR | David Sacks, 2020 |
| Runway | cash ÷ monthly net burn | Standard definition |
| Magic number | (QRev − QRev prior) × 4 ÷ S&M prior quarter | Lars Leckie, 2008 |
One company, six readings
A subscription company with $10.4M ARR. These are the calculator's example inputs for each metric.
| Metric | Inputs | Result | Reading |
|---|---|---|---|
| Rule of 40 | ARR $8.0M → $10.4M; EBITDA $1.15M on $9.2M revenue | 30% + 12.5% = 42.5% | Meets the rule |
| NRR / GRR | Start $400k; expansion $64k; contraction $12k; churn $28k | NRR 106%, GRR 90% | Expansion outweighs losses |
| Quick Ratio | New $30k + expansion $8k; churn $7k + contraction $2.5k | 4.0 | At Hamid's 4 |
| Burn Multiple | Net burn $3.0M; net new ARR $1.8M (quarter) | 1.67× | Under Sacks's ~2× |
| Runway | Cash $6.0M; burn $350k a month | 17.1 months | About 1.4 years |
| Magic number | Revenue $2.30M → $2.55M; S&M $1.1M | 0.91 | Above Leckie's 0.75 |
The same company can look strong on one metric and weak on another; read them together. Sample figures.
Where SaaS metrics get misused
The formulas are short. Most errors come from the inputs or from borrowed thresholds.
Mixing periods
Quarterly burn against annual net new ARR, or monthly MRR movements against yearly retention, gives numbers that mean nothing. Keep each calculation in one period.
New customers inside NRR
NRR and GRR follow only customers who existed at the start. Adding new customers turns retention into growth and inflates it.
Thresholds without a source
Tables of "good" values online often mix surveys, years and company sizes. Use the originator's line where one exists, and your own trend everywhere else.
Runway on last month only
One quiet month makes runway look long. Average burn over the last three months and plan for burn growing with headcount.
The revenue movements behind these metrics
TapCub is analytics, not accounting: it will not compute burn or EBITDA. The B2B SaaS template does track subscriptions from your billing events, so new, expansion and churned MRR and account-level retention are on a dashboard rather than in a spreadsheet.
Billing events with MRR
Subscription started, upgraded and cancelled, each with an MRR figure.
Learn moreMRR trends
New, expansion and churned MRR on one trend, next to payments collected.
Learn moreNineteen SaaS metrics
Signup, activation, trial conversion, MRR and churn, named the same in the console.
Learn moreSaaS metrics questions
Still have a question?
Chat with the team behind TapCub — we usually reply within a few hours on business days.
What is the Rule of 40?
A rule that a SaaS company's revenue growth rate plus its profit margin should be at least 40%. Brad Feld popularised it in a February 2015 post, using year-over-year MRR growth and EBITDA margin; others use free cash flow margin. 25% growth with a 15% margin, or 60% growth with a −20% margin, both score 40%.
How do I calculate net revenue retention?
Take recurring revenue from customers you had at the start of the period, add their expansion, subtract their contraction and churn, and divide by the starting figure. $400k + $64k − $12k − $28k = $424k, so NRR is 106%. New customers are not included.
What is the difference between NRR and GRR?
GRR counts only losses (churn and contraction), so it can never exceed 100%. NRR also adds expansion. A company with 90% GRR and 106% NRR loses a tenth of its base each year but grows the rest by more than that.
What is the SaaS Quick Ratio?
(New MRR + expansion MRR) ÷ (churned MRR + contraction MRR), introduced by Mamoon Hamid. A ratio of 4 means four dollars of new recurring revenue for every dollar lost; he described 4 or more as quite desirable.
What is a good Burn Multiple?
David Sacks, who proposed it in 2020, wrote that about 2× is reasonable for an early-stage company, that 3× or more signals a problem, and that the multiple should trend down as the company matures. It is not defined when net new ARR is zero or negative.
How do I calculate runway?
Cash ÷ average monthly net burn. $6M at $350k a month is about 17 months. Use net burn (cash out minus cash in), average it over recent months, and recalculate as hiring plans change.
What is the SaaS magic number?
A measure of sales efficiency: the change in quarterly recurring revenue, multiplied by 4, divided by the previous quarter's sales and marketing spend. Lars Leckie's 2008 post set 0.75 as the line above which to spend more.
Update history
New features, fixes and data refreshes for this tool, newest first.
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· v1.0
LaunchedFirst release.
Missing something or found an error? Tell us — requests that come up often go into the next update. All tool updates
Track the recurring revenue behind the ratios
Send subscription events from billing and follow new, expansion and churned MRR next to signups, activation and trials.