FA-301a · Module 1

The Retention Matrix

3 min read

The retention matrix — sometimes called a cohort triangle — is the single most powerful analytical tool in SaaS finance. It arranges cohorts by row and retention periods by column, creating a triangular grid where each cell shows the percentage of original revenue retained at that age. Reading down a column shows how different cohorts perform at the same age. Reading across a row shows how a single cohort degrades over time. Both directions tell a story.

Gross Revenue Retention by Cohort (% of Month-1 MRR):
────────────────────────────────────────────────────────
Cohort    Mo 1   Mo 3   Mo 6   Mo 9   Mo 12  Mo 18
────────────────────────────────────────────────────────
Q1-25    100%    97%    93%    90%    87%    81%
Q2-25    100%    96%    91%    87%    83%     —
Q3-25    100%    94%    88%    83%     —      —
Q4-25    100%    92%    85%     —      —      —
Q1-26    100%    90%     —      —      —      —
────────────────────────────────────────────────────────

Read down the Mo 3 column: 97→96→94→92→90
Each successive cohort retains worse at the
same age. This is cohort degradation — the
most important signal in the matrix.

Do This

  • Build retention matrices for both revenue and logo (customer count) retention
  • Read down columns to detect cohort degradation trends
  • Flag any column where the trend is consistently downward across 3+ cohorts

Avoid This

  • Report only the blended retention number that averages all cohorts together
  • Build the matrix once and never update it — retention behavior evolves
  • Ignore early-stage signals because "the sample size is small" — act on the trend, validate later