ARPU (Average Revenue Per User)
Average Revenue Per User (ARPU) is the average monthly revenue generated per paying customer. It's the building block for LTV, MRR projections, and pricing decisions.
Formula
In depth
ARPU helps you understand the average value of a customer and how it changes over time. Rising ARPU suggests successful upsells or price increases. Falling ARPU suggests downgrade pressure or acquiring lower-value customers.
ARPU segments worth tracking: - New customer ARPU (what plan do new customers start on?) - Expansion ARPU (how does ARPU grow over time for existing customers?) - Churned ARPU (are you losing high or low ARPU customers?)
For B2B SaaS, ARPU above $500/month enables a sales-assisted motion. Below $100/month, you need self-serve acquisition — the economics of outbound sales don't work.
Real example
MRR: $50,000. Paying customers: 250. ARPU = $200/month. At 2% monthly churn, LTV = $200 × 0.75 margin ÷ 0.02 = $7,500.
Tools & calculators
Related terms
MRR (Monthly Recurring Revenue)
Monthly Recurring Revenue (MRR) is the predictable, normalized monthly revenue generated from all active subscriptions. It's the north star metric for SaaS companies.
CAC (Customer Acquisition Cost)
Customer Acquisition Cost (CAC) is the total cost of acquiring one new paying customer, including all marketing and sales spend.
LTV (Lifetime Value)
Customer Lifetime Value (LTV or CLV) is the total predicted revenue you'll earn from a customer over the entire duration of your relationship.
Churn Rate
Churn rate is the percentage of customers (or revenue) that cancels or doesn't renew in a given time period. It's the single most important retention metric for subscription businesses.
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