Last reviewed October 7, 2026 · By the NYBACS advisory team
Short answer
Most US startups should track a core set: cash balance, net burn and runway; revenue growth; gross margin; and, depending on the model, ARR or MRR, net revenue retention, customer acquisition cost (CAC), lifetime value (LTV) and CAC payback. Each metric needs a written definition and should be calculated from closed, reconciled books, because investors will recompute them in due diligence.
Key takeaways
- Runway equals cash divided by average monthly net burn, and net burn is cash out minus cash in — not total expenses.
- ARR and MRR count recurring contracted revenue only; one-time setup fees, services and usage spikes should be excluded or shown separately.
- Gross margin depends on what is classified as cost of revenue; for most SaaS businesses that includes hosting, payment fees and customer support.
- LTV to CAC is only meaningful when CAC is fully loaded and LTV is based on gross margin rather than revenue.
- Efficiency ratios such as burn multiple — net burn divided by net new ARR — show how much cash growth is costing.
Cash metrics: burn and runway
Cash metrics come first because they determine how long the company can operate.
- Gross burn — total cash spent in the month.
- Net burn — cash spent minus cash received from operations.
- Runway — cash balance divided by average net burn, usually over the last three months.
Example: a startup has USD 900,000 in the bank, spends USD 160,000 a month and collects USD 85,000 from customers. Net burn is USD 75,000 and runway is 12 months.
Exclude financing inflows such as SAFE proceeds or loans from the burn calculation; they extend runway by increasing cash, not by reducing burn. And check the forecast, not just history: planned hires or an annual software renewal can shorten runway quickly.
Revenue metrics: ARR, MRR and retention
- MRR — monthly recurring revenue from active subscriptions; ARR is MRR multiplied by 12.
- Net revenue retention (NRR) — recurring revenue today from customers who were customers a year ago, including expansion and net of churn and downgrades, divided by their recurring revenue a year ago.
- Gross revenue retention (GRR) — the same, excluding expansion; it can never exceed 100%.
- Logo churn — the share of customers lost in the period.
ARR is a run-rate measure, not the revenue on the P&L. A customer that prepays USD 24,000 for a 12-month contract adds USD 24,000 to ARR, but accrual revenue recognizes USD 2,000 a month. Keep bookings, billings, ARR and recognized revenue as separate figures and reconcile them each month.
Gross margin and unit economics
Gross margin is revenue minus cost of revenue, divided by revenue. It is only comparable if cost of revenue is defined consistently; moving hosting or support costs into operating expenses can flatter it, and diligence will move them back.
CAC is total sales and marketing cost — including salaries, commissions, tools and agencies, not just ad spend — divided by new customers acquired in the period.
CAC payback is how many months of gross profit it takes to recover CAC. Example: CAC of USD 6,000, average monthly revenue per customer of USD 500 and an 80% gross margin give a payback of 6,000 ÷ (500 × 0.8) = 15 months.
LTV is commonly estimated as average monthly revenue per customer × gross margin ÷ monthly churn rate. With 2% monthly churn in the example, LTV is 500 × 0.8 ÷ 0.02 = USD 20,000, an LTV to CAC ratio of about 3.3. The figure is highly sensitive to the churn assumption, which is why cohort data matters.
Metrics by business model
| Model | Metrics that matter most |
|---|---|
| B2B SaaS | ARR, NRR, GRR, gross margin, CAC payback, burn multiple |
| E-commerce | Gross merchandise value, average order value, contribution margin per order, repeat purchase rate, return rate, inventory days |
| Marketplace | GMV, take rate, liquidity measures, contribution margin |
| Services or agency | Utilization, realized billing rate, revenue per employee, receivables days |
| Hardware | Unit gross margin, inventory turns, warranty costs, cash conversion cycle |
Pre-revenue companies should focus on cash, burn, runway and progress against milestones rather than forcing revenue metrics too early.
Keeping metrics credible
- Write a definitions document and change it only deliberately, noting the change in reports.
- Calculate metrics from closed books and a single customer data source, then reconcile them — ARR to revenue, customer counts to billing.
- Track cohorts so churn and expansion are visible by signup period, not hidden by overall growth.
- Use identical figures in the pitch deck, board pack and investor update.
Investors routinely rebuild a startup's key metrics from raw data during diligence. Metrics that already reconcile to the books tend to come through that process intact.
For a foreign-founded startup, one more check applies: make sure metrics are reported for the right entity. If customers contract with a home-country company and the US company only bills some of them, ARR, margins and burn need to be shown per entity and on a combined basis, with intercompany charges removed, so investors in the US company see what they are actually investing in.
Common mistakes to avoid
- Including one-time fees in ARR, or annualizing a single strong month.
- Calculating runway from the P&L rather than from actual cash movements.
- Leaving hosting and payment fees in operating expenses, inflating gross margin.
- Calculating CAC from advertising spend alone, excluding sales salaries and commissions.
- Reporting blended churn that hides weak recent cohorts behind strong older ones.
- Using different definitions in the pitch deck and the board pack.
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How NYBACS helps
- Writes a metric definitions dictionary tailored to your business model.
- Calculates monthly KPIs from closed, reconciled books and reconciles ARR to recognized revenue.
- Builds cohort analyses for churn, retention and payback.
- Models runway scenarios as hiring, pricing or fundraising assumptions change.
- Prepares investor-ready metrics that will hold up when diligence teams recompute them.
Frequently Asked Questions
How much runway should a startup have?
There is no single rule, but many founders aim to have well over a year of runway after a raise and to start the next raise while there are still many months of cash left, because fundraising takes time. The right level depends on growth plans and market conditions.
What is the difference between ARR and revenue on the P&L?
ARR is the annualized value of active recurring contracts at a point in time. P&L revenue is what was earned in a period under the accounting method used. They should be reconciled, but they will rarely be the same figure.
What is a good LTV to CAC ratio?
A ratio around 3:1 is often cited as healthy for SaaS, but it depends on the reliability of the churn assumption, the payback period and the business model. Payback in months is often a more practical check.
What is burn multiple?
Net burn divided by net new ARR for the same period. A lower number means growth is being achieved more efficiently; it is most useful for comparing a company's own trend over time.
Which metrics matter before revenue?
Cash balance, net burn, runway and progress against product and commercial milestones. Revenue metrics become meaningful once there are enough paying customers to measure.
