Reference · Updated May 2026
The Subscription Business Glossary
Every metric, lever, and piece of jargon in the Subscribe & Conquer book — defined in one sentence, then explained in two more. Bookmark it, link your team to it, or copy a definition straight into your board deck.
22 terms · written by Ross Williams, who bootstrapped a subscription business to $50M in recurring revenue.
A
- ARPU (Average Revenue Per User)
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ARPU is the average revenue a subscription business earns per active subscriber in a given period.
Calculated as total revenue ÷ active subscribers. Tracked monthly or annually, ARPU rises through pricing increases, plan upgrades, or add-on attach — and falls when discounts or downgrades dominate.
- ARR (Annual Recurring Revenue)
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ARR is the value of recurring subscription revenue normalised to a one-year run rate.
Calculated as MRR × 12 (or sum of annual contract values for SaaS). ARR is the headline number investors and acquirers anchor on; growth efficiency is judged as new ARR added per dollar of sales-and-marketing spend.
C
- CAC (Customer Acquisition Cost)
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CAC is the fully-loaded cost to acquire one paying customer, including paid media, sales salaries, and tooling.
Healthy SaaS businesses target an LTV:CAC ratio of 3:1 or higher and a CAC payback period under 12 months. Consumer subscription businesses often target sub-3-month payback because churn is faster.
- CAC Payback Period
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The number of months of gross profit it takes to recover the cost of acquiring a customer.
Calculated as CAC ÷ (ARPU × gross margin). Shorter payback means faster compounding and less working capital tied up — bootstrapped subscription businesses live or die by this metric.
- Card Updater (Account Updater)
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A card-network service (Visa VAU, Mastercard ABU, Amex CardRefresher) that automatically updates expired or reissued card details on file.
Enabling account updaters is the single highest-leverage involuntary-churn fix — typically recovering 30-50% of payments that would otherwise fail at renewal. Most modern processors expose it as a one-click toggle.
- Churn
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Churn is the rate at which subscribers cancel, fail to renew, or stop paying within a given period.
Reported monthly or annually. Subdivided into voluntary churn (active cancellation) and involuntary churn (failed payment), and into logo churn (customer count) and revenue churn (dollar value).
- Cohort Analysis
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Grouping subscribers by their signup month (or campaign) and tracking their retention and revenue over time.
Cohort curves expose whether retention is genuinely improving or whether headline churn is being masked by a flood of new signups. Read the slope of month-3 to month-12 retention to judge product-market fit.
- Contraction MRR
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The MRR lost from existing subscribers downgrading plans, removing seats, or dropping add-ons (without fully cancelling).
Contraction sits between expansion and churn in the MRR movement equation. High contraction signals the wrong customers are on the wrong tiers — usually a packaging problem, not a product one.
D
- Dunning
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The structured retry-and-communication process for recovering failed subscription payments before the subscriber is cancelled.
A typical dunning sequence retries the card on intelligent timing (3, 5, 7, 14 days) and emails the customer in parallel. Best-in-class dunning recovers 60-70% of failed payments; default Stripe Smart Retries alone recovers ~40%.
E
- Expansion Revenue
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Additional MRR generated from existing subscribers via upgrades, seat additions, usage overages, or cross-sell.
When expansion exceeds churn + contraction, NRR is above 100% and the business compounds without acquiring a single new customer. The fastest-growing SaaS companies report NRR of 120-130%.
F
- Freemium
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A pricing model that offers a perpetually free product tier, monetised by upgrading a minority of users to paid plans.
Freemium works when marginal serving cost is near zero, the free product is genuinely useful, and natural upgrade triggers (limits, collaboration, advanced features) are baked in. Typical free-to-paid conversion is 2-5%.
- Free Trial
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A time-bound period (typically 7, 14, or 30 days) of full product access designed to convert prospects to paid subscribers.
Opt-in trials (no card required) drive top-of-funnel volume; opt-out trials (card required) drive higher conversion but lower volume. Most consumer subscription businesses see 40-60% trial-to-paid conversion on opt-out trials.
G
- GRR (Gross Revenue Retention)
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GRR is the percentage of recurring revenue retained from a cohort, excluding any expansion — capped at 100%.
GRR isolates the leak. World-class SaaS targets 90%+ GRR; consumer subscriptions typically run 60-80%. Pair with NRR to see whether expansion is masking a retention problem.
I
- Involuntary Churn
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Subscriber loss caused by failed payments — expired cards, insufficient funds, or fraud blocks — rather than active cancellation.
Involuntary churn typically accounts for 20-40% of all subscription cancellations and is the most recoverable form. Account updaters, intelligent retries, and pre-expiry email flows together claw back the majority.
L
- Logo Retention
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The percentage of customer accounts (logos) retained over a period, ignoring revenue per account.
Use logo retention to judge product fit; use revenue retention (GRR/NRR) to judge commercial fit. Sharp divergence — high logo retention but low GRR — usually means downgrades are eating contract value.
- LTV (Lifetime Value)
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LTV is the total gross profit a subscription business expects to earn from an average customer over the lifetime of the relationship.
Simple form: LTV = ARPU × gross margin ÷ churn rate. Use LTV against CAC to size acquisition channels — anything below 3:1 LTV:CAC is hard to scale profitably.
M
- MRR (Monthly Recurring Revenue)
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MRR is the predictable subscription revenue normalised to a one-month value, regardless of billing cadence.
Annual contracts are divided by 12 to express in MRR. The MRR movement equation — New + Expansion − Contraction − Churn = Net New MRR — is the operating heartbeat of every subscription business.
N
- NDR (Net Dollar Retention)
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NDR is another name for NRR — the percentage of recurring revenue retained from a cohort, including expansion, net of churn and contraction.
Used interchangeably with NRR in SaaS reporting. Public SaaS benchmarks: best-in-class >130%, healthy 110-120%, concerning <100%.
- NRR (Net Revenue Retention)
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NRR is the percentage of recurring revenue retained from a cohort over a period, including expansion and net of churn and contraction.
Calculated as (starting MRR + expansion − contraction − churn) ÷ starting MRR. NRR above 100% means the business grows from existing customers alone — the holy grail of subscription economics.
P
- Paywall
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A gating mechanism that requires payment (or signup) before content, features, or usage continues.
Hard paywalls maximise revenue per visitor; metered paywalls (e.g. 5 free articles a month) maximise reach. Mobile-app paywall design — copy, pricing layout, social proof — is now the single biggest driver of consumer subscription conversion.
T
- Trial Conversion Rate
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The percentage of free-trial signups who become paying subscribers at the end of the trial.
Opt-out trials (card on file) typically convert 40-60%; opt-in trials convert 10-25%. Onboarding quality, time-to-first-value, and a clear upgrade prompt at trial expiry are the three biggest levers.
V
- Voluntary Churn
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Subscriber loss caused by an active cancellation decision — distinct from involuntary churn caused by failed payments.
Reduce voluntary churn through better onboarding, in-product engagement, save flows in the cancellation journey, and pause-instead-of-cancel offers. A well-designed save flow recovers 15-25% of attempted cancellations.
The full playbook
Every term here is a chapter in the book.
Subscribe & Conquer turns these definitions into 12 chapters of operating detail — pricing experiments, retention saves, dunning sequences, expansion plays — drawn from 21 years bootstrapping a subscription business to $50M.
Read the free chapter →