Been tracking MRR growth but realized I might be using the wrong formula.
Some people calculate month-over-month, others do year-over-year. Then there’s compound growth rates.
What actually tells you if your growth is sustainable long-term?
Just look at cash flow. Revenue means nothing if it disappears.
MRR growth with cohort retention is what I track now. Learned this the hard way on a productivity app where we hit 25% monthly growth but lost 60% of users after month 3.
The real test is looking at your cohorts 6-12 months out. If those early users are still paying and upgrading, your growth has legs. If they’re churning, you’re just buying temporary numbers.
I also watch the ratio between new revenue and expansion revenue. When expansion starts beating new acquisition revenue, that’s when you know you’ve got something sticky.
This breakdown helped me understand why net revenue retention matters more than just tracking MRR bumps.
Quarterly growth gives a better view. Month over month changes can be misleading.
Year-over-year shows the real picture. Monthly numbers bounce around too much from seasonality, marketing campaigns, or random events. But the best metric is actually net revenue retention. If you’re keeping customers and they’re spending more over time, that’s sustainable growth. MRR growth without looking at churn rates will fool you. You could be growing 20% monthly while bleeding customers and not know it until the acquisition spigot turns off.
Tracking monthly growth is important, but focus on a six-month trend. One-month spikes don’t show true progress when running ads. The key is maintaining growth without upping ad spend.
If your cost per paying user remains stable while revenue increases, that’s a good sign. But if acquisition costs rise faster than revenue, you might be reaching a limit.