Running a SaaS business requires managing many different tasks—tracking signups, ensuring customer satisfaction, and driving revenue growth. But how can you truly know if your business is on the right track?
That’s where SaaS metrics come into play.
These metrics provide the numbers that tell the true story of what’s working in your business and what’s not. Whether you’re bootstrapping or backed by venture capital, monitoring these key metrics helps you make smarter decisions, faster.
In this article, I’ll highlight 18 essential SaaS metrics that every founder, CEO, or team leader should be tracking..
What Are SaaS Metrics?
SaaS metrics are simply the numbers that help you understand how well your software business is doing. They show things like how many customers you have, how much money you’re making, how many people stick around, and whether your customers are happy.
These numbers help you figure out what’s working and what’s not. For example, if a lot of people sign up but quickly cancel, that’s a sign you might need to improve something. Or, if your customers are staying longer and spending more, that’s a good sign that your product is meeting their needs.
In short, SaaS metrics are tools that give you a clear picture of your business’s health and help you make better decisions.
Why Should You Track SaaS Metrics?
Tracking SaaS metrics is important because they give you clear insights into how your business is doing. By looking at the right numbers, you can see what’s working and what needs improvement. For example, if your churn rate is high, you’ll know that you need to focus on keeping your customers happy. If your customer acquisition cost is too high, you might need to adjust your marketing strategy.
These metrics also help you make better decisions. Instead of guessing, you’ll have actual data to guide you. Whether you’re deciding how much to spend on marketing or how to improve your product, metrics help you make smarter choices.
In the end, tracking SaaS metrics helps you grow your business, keep customers happy, and stay ahead of any problems before they get too big.
18 Most Important SaaS Metrics to Track
Let us now dive into the broad classification of SaaS metrics and understand the role each of them play.
Customer Acquisition Metrics
1. Customer Acquisition Cost (CAC)
CAC is the cost associated with acquiring a new customer. It is calculated by dividing all sales and marketing costs spent on convincing a customer to buy a product or service, divided by the total number of new customers gained in a given period.
2. Customer Lifetime Value (CLV or LTV)
CLV represents the revenue a business expects an average customer to generate during their entire relationship with the business. Meanwhile, LTV calculates the overall value of all customers.
3. Customer Churn Rate
Customer Churn Rate measures the percentage of customers who stop using a service over a specific period. The metric can be evaluated annually, monthly, weekly or daily.
4. Return on Investment (ROI)
ROI is used to evaluate the profitability of an investment relative to its cost. It is expressed as a percentage and is calculated by dividing an investment’s net profit by its initial cost or outlay.
5. Lead-to-Customer Conversion Rate
The Lead-to-Customer Conversion Rate measures the percentage of leads converted to actual customers. It assesses the effectiveness of sales and marketing efforts in converting potential leads into paying customers, providing insights into the efficiency of the conversion process.
Customer Engagement Metrics
6. Customer Satisfaction Score (CSAT)
Customer satisfaction score measures the level of satisfaction customers experience with a product or service. It involves surveys, feedback, or ratings, providing insights into customer perceptions and helping businesses improve overall satisfaction levels to enhance customer loyalty and retention.
To calculate the percentage of satisfied customers,
7. Net Promoter Score (NPS)
NPS measures customer loyalty by asking, “On a scale of 0-10, how likely are you to recommend our product/service?”. Promoters (9-10) are enthusiastic advocates, while Detractors (0-6) are unhappy customers.
Subtracting Detractors from Promoters yields the NPS, a gauge of overall customer satisfaction and loyalty.
8. Customer Engagement Score
Customer Engagement Score quantifies the level of interaction and involvement customers have with a product or service. It’s often calculated by considering metrics like usage frequency, feature adoption, and feedback.
Customer Retention Metrics
9. Customer Retention Rate
Customer retention rate (CRR) measures the number of customers that a business retains over a specific period. It’s represented as a percentage of the company’s existing customers who continue to show loyalty during the specified period.
CRR = [(E – N) / S] x 100,
Where,
E = number of customers at the end of time period.
N = number of customers gained within the time period.
S = number of customers at the start of time period.
For example, you have 130 customers at the start of the month. You gain 20 new customers and lose 5 customers till the end of the month. So, you now have 145 customers at the end of the month.
CRR = [145 – 20 / 130] x 100 = 96.15%
10. Repeat Purchase Rate (RPR)
Percentage of customers who make more than one purchase are measured by RPR. By making another transaction on a later date, the customer (and the transaction) is categorized as a “repeat purchase”.
11. Average Customer Lifespan (ACL)
ACL is the average duration a customer stays subscribed to a service before churning. It also influences Customer Lifetime Value (CLV).
Growth Metrics
12. Monthly Recurring Revenue (MRR)
MRR is the predictable revenue stream generated from subscription-based services each month. It includes charges from discounts, coupons, and recurring add-ons, excluding one-time fees.
13. Annual Recurring Revenue (ARR)
ARR is the predictable annual revenue generated from subscriptions. It can also be defined as the value of the recurring revenue of a business’s subscriptions normalized for a single calendar year.
14. Net New Customers
Net New Customers is the net number of new customers added after taking into account the number of customers lost due to churn.
15. Average Revenue Per User (ARPU)
ARPU is a metric that calculates the average revenue generated per customer over a specific period.
Economics Metrics
16. CAC-to-LTV Ratio
CAC to LTV ratio compares the cost of acquiring a customer (CAC) to the potential revenue generated over their lifetime (LTV).
CAC to LTV ratio = CAC/LTV
Ideally, the ratio should be 1:3 which means the company should make 3 times the revenue spent on acquiring a customer.
17. Gross Margin
Gross margin is the percentage of revenue retained after accounting for the cost of goods sold (COGS) such as labor and raw materials.
18. Hype Ratio
The Hype Ratio is an important metric revealing a company’s efficiency in converting raised capital into Annual Recurring Revenue (ARR). SaaS firms ideally convert venture capital into ARR and hype. ARR holds intrinsic value, transitioning into GAAP (generally accepted accounting principles) revenue annually.
Conclusion
To wrap things up, tracking the right SaaS metrics is a simple yet powerful way to understand how your business is doing. By paying attention to these key numbers, you can quickly spot what’s working well and where improvements are needed. This helps you make smarter decisions, fix problems early, and keep your business growing.
Whether you’re a new startup or an established business, SaaS metrics guide your actions and help you stay on track. They provide the data you need to improve customer satisfaction, increase revenue, and grow your company the right way. Staying consistent with tracking these metrics means you can always make decisions based on facts, not guesses, and keep moving forward with confidence.
Also read about SaaS KPIs – 12 SaaS KPIs Every Company Should Track
