How your product generates (or is meant to generate) money, and whether that model has been tested with real customers.
In practice
This stage doesn't judge how much money comes in, but whether the revenue model has actually been tested against real customers — plenty of products have a monetization plan for "later" that has never met a credit card. A commonly cited SaaS rule of thumb is an LTV:CAC ratio around 3:1 as a viability threshold (see LTV and CAC) — treat it as a directional benchmark, not an absolute rule for every market. Upsell and cross-sell are the fastest levers once the base model is validated.
The formula
MRR next month = MRR this month + new + expansion − contraction − churned
- New MRR
What new customers add: the output of acquisition and activation, priced. The only term most early teams look at.
- Expansion MRR
Existing customers paying more: upgrades, added seats, usage, cross-sold modules. The term an expansion playbook exists to grow — and the one that can make net revenue churn negative.
- Contraction and churned MRR
Downgrades and cancellations. Together with expansion they form net revenue retention (NRR): what last year's customers pay this year, as a share of what they paid then.
Pricing sets the size of every term. A price chosen "a bit arbitrarily" is the single most common unforced error in this stage: it caps new MRR, leaves no room for expansion, and is almost never revisited because changing it feels risky. Testing it is what the Tour's first Revenue question asks about.
Worked example
The same month, read as the Revenue stage
- Start of month: €20,000 MRR from 400 customers (€50 average). New customers: 40 at €50 = +€2,000.
- Expansion: 15 customers move from the €50 plan to the €110 one, +€900. Contraction: 8 downgrade, −€400. Churn: 12 cancel, −€600.
- End of month: 20,000 + 2,000 + 900 − 400 − 600 = €21,900. Growth: +9.5%. Net revenue retention on the existing base: (20,000 + 900 − 400 − 600) ÷ 20,000 = 99.5%.
- Now suppose pricing had been tested and the upper plan priced at €130 instead of €110: the same 15 upgrades bring +€1,200, NRR reaches 101%, and the business grows even in a month with zero new customers.
Revenue is not "how much came in". It is whether each of these five terms is known, and whether the two you control most directly — price and expansion — have ever been tested rather than assumed.
Orders of magnitude
- Net revenue retention is the number SaaS investors read first: above 100% means the existing base grows on its own; the best B2B companies report 110-130%, driven by expansion. Below 90%, growth has to outrun a leaking base.
- The LTV:CAC rule of thumb of about 3:1 lives in this stage too — it is where price, margin and lifetime meet the cost of acquisition. Scoring the stage on "has the model been tested?" rather than on the amount is deliberate: the amount follows from the terms above, not the reverse.
- Pricing changes are less dangerous than they feel: most price increases on a product people rely on lose a small share of customers and gain far more in revenue, and grandfathering existing customers removes most of the risk. The costly move is never testing.
How to improve it
- Test the price against alternatives — two landing pages, two plans, a cohort at a new price — instead of choosing it once and defending it forever. Willingness-to-pay interviews with ten customers beat a competitor grid.
- Build a pricing model with room to grow: seats, usage, tiers, add-ons. Expansion MRR only exists if there is somewhere for a happy customer to go.
- Write the expansion playbook down: which signal (usage near a limit, a second team, a feature request) triggers which offer, made by whom, when. "Some ideas, not systematic" is the 7-point answer because ideas don't compound.
- Track the five terms of the MRR identity monthly, per plan. Revenue that is only read as a total hides which of the five is quietly going wrong.
In the Tour
Has your pricing model been tested, not just chosen?
- Yes, tested against alternatives20 pts
- Chosen with some reasoning, not tested7 pts
- Picked arbitrarily0 pts
Revenue is the fifth stage of the Tour, and its questions are about knowledge, not amounts: has the pricing model been tested, not just chosen (20 for tested against alternatives, 7 for chosen with some reasoning, 0 for picked arbitrarily); is the LTV known, even roughly; and is there an expansion playbook, active and used. A product that charges real money but answers 7 to all three lands in the weak band — the score is not about what you earn but about whether the model behind it has ever met reality.
Questions people ask
Why does the Tour score Revenue on testing rather than on revenue itself?
Because the amount is a lagging output of the other four stages, while the model is a decision you own. Two products with the same MRR can be in opposite situations: one with a tested price, a known LTV and an expansion path, the other with an arbitrary price it dares not touch. The second will hit a wall the first won't — and the number wouldn't have told you.
What's the difference between MRR, ARR and revenue?
MRR is monthly recurring revenue: the subscription income you can expect next month if nothing changes, excluding one-off fees. ARR, annual recurring revenue, is MRR × 12, used for annual contracts and fundraising. Revenue, in accounting terms, is what was actually recognised in a period, one-offs included. Growth teams steer on MRR because it moves fast enough to learn from.
When should a free product start charging?
Earlier than feels comfortable — because the first price test teaches you more about value than any survey, and because a user base built on free is harder to convert later than one that always knew a paid tier existed. Charging a small number of customers a real price beats charging nobody: it answers the pricing question the Tour asks with evidence instead of reasoning.