Methodology & Sources

Transparency is a core value at PM Toolkit. Here you will find every formula we use, where it comes from, and why we chose it.

Last updated: March 2026

Our Approach to Calculations

Every calculator in PM Toolkit is built on established formulas from academic research, industry standards, and proven frameworks. We cite our sources so you can verify our methodology and understand the context behind each metric.

When multiple calculation methods exist (like LTV), we offer all common approaches and explain when to use each one. Our benchmarks are sourced from public industry reports and updated regularly.

SaaS Economics

Customer Lifetime Value (LTV)

Formula

LTV = (ARPU x Gross Margin) / Monthly Churn Rate

Source: Bessemer Venture Partners

BVP Cloud Index, industry standard for SaaS unit economics since 2012.

Customer Acquisition Cost (CAC)

Formula

CAC = Total Sales & Marketing Spend / New Customers Acquired

Source: David Skok, For Entrepreneurs

Widely adopted formula from David Skok's SaaS Metrics 2.0 framework.

Monthly Recurring Revenue (MRR)

Formula

MRR = Sum of all recurring subscription revenue per month

Source: KeyBanc SaaS Survey

Annual KeyBanc Capital Markets SaaS Survey, used by leading SaaS companies globally.

Churn Rate

Formula

Customer Churn = Customers Lost / Total Customers at Start of Period

Source: ProfitWell / Paddle

Revenue churn methodology aligned with ProfitWell benchmarking data across 30,000+ SaaS companies.

Prioritization Frameworks

RICE Scoring

Formula

RICE = (Reach x Impact x Confidence) / Effort

Source: Intercom

Created by Sean McBride at Intercom. Published in "Intercom on Product Management" (2016).

ICE Scoring

Formula

ICE = Impact x Confidence x Ease

Source: Sean Ellis

Developed by Sean Ellis (GrowthHackers) as a simpler alternative to RICE for growth experiments.

Weighted Scoring

Formula

Score = Sum of (Criterion Score x Criterion Weight) for all criteria

Source: Decision Analysis Theory

Based on multi-criteria decision analysis (MCDA), a well-established decision science methodology.

Kano Model

Formula

Classification via paired functional/dysfunctional questionnaire matrix

Source: Noriaki Kano

Developed by Professor Noriaki Kano at Tokyo University of Science (1984). "Attractive Quality and Must-Be Quality" paper.

Impact/Effort Matrix

Formula

2x2 matrix plotting estimated impact against implementation effort

Source: Lean/Agile Methodology

Standard prioritization tool from lean product development and agile methodology.

Statistical Testing

A/B Test Calculator

Formula

Z-test: Z = (p1 - p2) / sqrt(p(1-p)(1/n1 + 1/n2))

Source: Fisher / Neyman-Pearson

Based on the Neyman-Pearson hypothesis testing framework and Fisher's exact test for proportions.

Sample Size Calculator

Formula

n = (Z_alpha/2 + Z_beta)^2 x (p1(1-p1) + p2(1-p2)) / (p1 - p2)^2

Source: Statistical Power Analysis

Jacob Cohen's "Statistical Power Analysis for the Behavioral Sciences" (1988).

NPS Calculator

Formula

NPS = % Promoters (9-10) - % Detractors (0-6)

Source: Fred Reichheld / Bain & Company

Created by Fred Reichheld at Bain & Company. Published in Harvard Business Review, "The One Number You Need to Grow" (2003).

Market & Growth Metrics

TAM/SAM/SOM (Market Sizing)

Formula

TAM > SAM > SOM: Top-down and bottom-up estimation methods

Source: McKinsey & Company

Standard market sizing framework used by McKinsey, BCG, and leading strategy consultancies worldwide.

ROI & Payback Period

Formula

ROI = (Net Gain - Cost) / Cost x 100%

Source: Financial Analysis Standards

Standard corporate finance methodology. Payback period calculation follows discounted cash flow principles.

Conversion Rate

Formula

CR = Conversions / Total Visitors x 100%

Source: Digital Analytics Association

Industry-standard metric definition aligned with Google Analytics and digital marketing best practices.

DAU/MAU Ratio

Formula

Stickiness = Daily Active Users / Monthly Active Users

Source: Facebook / Meta

Popularized by Facebook as a key engagement metric. Widely adopted across consumer and B2B SaaS.

Retention Analytics

Formula

Retention Rate = (Users at End - New Users) / Users at Start x 100%

Source: Cohort Analysis Methodology

Cohort-based retention analysis standard. Used by Amplitude, Mixpanel, and product analytics platforms.

PMF Score

Formula

PMF = % of users who would be "very disappointed" without product

Source: Sean Ellis

Sean Ellis' Product-Market Fit survey. 40%+ "very disappointed" threshold published in "Hacking Growth" (2017).

Execution & Delivery

Sprint Velocity

Formula

Velocity = Total Story Points Completed / Number of Sprints

Source: Scrum Framework

Core Scrum metric defined in the Scrum Guide by Ken Schwaber and Jeff Sutherland.

Cycle Time & Lead Time

Formula

Cycle Time = End Date - Start Date for each work item

Source: Kanban / Lean Manufacturing

Derived from Toyota Production System and adapted for software by David Anderson's Kanban method.