Important Metrics for a SaaS Business
SaaS Metrics are one of the most important aspects of any SaaS company’s growth strategy. They’re what allow us to measure how our software is doing, see which features are working well, and make improvements on areas that aren’t.
A good set of metrics can tell you more about your company than anything else.
So we’re going to look at the 20 metrics you need on any given month-to-month basis, as well as how they work on a broader schedule.
20 Important Metrics for a SaaS Business
Here are the several metrics every SaaS company should be following each month:
1. Monthly Recurring Revenue (MRR)
Monthly Recurring Revenue (MRR is how much money your company brings in each month, for as long as those customers remain at that price level.
For instance, if your $15 monthly MRR customers stay subscribed, then your monthly revenue will be $15 x 12 months = $180 per year per customer.
Ideally you grow the number of monthly customers, so perhaps you’d like MRR to increase by 3x.
Why this SaaS MRR metric is important?
MRR is the lifeblood of most SaaS companies, and it’s also the key factor that determines your profit margin.
You can’t improve your MRR without improving customer retention, which is done by ensuring your product is solving a significant pain for a significant amount of customers. This metric really tells you how well you’re doing on that front.
How to analyze monthly recurring revenue
Adding up the MRR numbers for each month, then dividing by the number of subscribers (to determine customer churn).
Then take the churn rate, divide it by the MRR for that month to derive the monthly MRR for that customer.
SaaS MRR is one of the most important metrics on your dashboard. Without it you can’t get a good feel for how you’re doing, and as such you can’t really make any improvements.
2. Monthly Churn Rate
Monthly Churn rate is similar to MRR, but measures the churn rate of your customers. Churn is when a customer cancels his subscription, or if his subscription ends prematurely (e.g., additional months are not purchased).
This metric generally indicates how happy your customers are with your service and how effective your marketing and sales efforts are.
Why this SaaS Monthly Churn Rate metric is important?
Churn rate is the number one metric to monitor because it’s what tells you how well your business is. If you run a SaaS business, then your goal is to grow MRR. Churn is a direct indicator of whether or not you’re doing so.
How to analyze monthly churn rate
Add up the monthly churn for each month, divide by the MRR for that month, and by 12 (the number of months).
This will tell you the percentage of subscribers that are churning each month. Take the number churned in the previous month, multiply it by 12 – this is the monthly churn rate for that subscriber.
SaaS Monthly Churn, like MRR, is one of the most important metrics on your dashboard. Without it you can’t get a good feel for how you’re doing, and as such you can’t really make any improvements.
3. Net Promoter Score (NPS)
Net Promoter Score (NPS) is a metric that measures how happy customers are with your company. It works by polling your customers on a 1-5 scale (1 meaning “very unsatisfied”, 5 meaning “very satisfied”).
The metric is computed as the proportion of 5-star reviews divided by the proportion of 1-star reviews.
Why this SAA Single NPS metric is important?
NPS determines how much money you bring in – it’s an important driver of revenue and profit growth. The higher your NPS, the more likely new customers are to buy your product.
How to analyze net promoter score
Get a sample of customers, ask them the NPS question, then submit the results to a net promoter score calculator.
This will give you a number from 0-100, and from there you can reasonably estimate revenue growth based on that number.
SaaS companies should be tracking their NPS monthly or quarterly at least – this will allow you to see how your company is doing over time.
4. MRR by Customer Type
Monthly Recurring Revenue by Customer Type (MRR/CTR) shows how many customers are subscribing to your product at each price level, and how much revenue each price point returns.
This will help you determine if your pricing is in the right range for these buyers, and allow you to set up a clear growth strategy for the pricing tiers.
Why this SaaS MRR/CTR metric is important?
As a SaaS business, your goal is to grow the number of customers and the number of months they remain at each price level.
MRR by Customer Type gives you those insights. It tells you how different price points are performing, and how often you can expect your customers to upgrade their subscription.
How to analyze monthly recurring revenue by customer type
Add up the MRR for each customer type, and divide by the total subscribers for that month. This will tell you how much revenue each customer type brings in.
Divide the MRR by the churn rate (average monthly churn rates) to determine how much more revenue is attributable to new customers.
How long should you track this SaaS MRR/CTR metric? That depends on your business model, but we recommend quarterly for most cases. It would be best to track it for each month, but that can get a bit tedious and time-consuming, so quarterly is a good compromise.
5. Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) is the amount of money that your average customer will bring you, from the moment they first start buying your product until they leave.
It’s determined by taking the average MRR and multiplying it by your churn rate, then adding that to the MRR of a new customer.
Why this SaaS CLV metric is important?
The CLV metric tells you how profitable your customers are – it indicates how much money your customers are bringing in even after losing customers.
How to analyze customer lifetime value
Add up MRR for each month a customer is subscribed. Then subtract the churn rate for that same time period.
This number represents the contribution of each customer to your monthly revenue. Multiply this by 12, and you’ll get the CLV for that customer.
Keep track of this metric monthly or quarterly, depending on how often you update your pricing or make other changes that affect your customers’ lifetime value.
6. Annual Recurring Revenue (ARR)
Annual Recurring Revenue is simply the annual revenue that your customers are paying for in one year.
Why this SaaS ARR metric is important?
Your goal as a SaaS business is to grow this metric. If you don’t keep your ARR within certain limits, you’ll have trouble bringing in the revenue that you need. To ensure this happens, you should track this metric monthly or quarterly.
How to analyze your annual recurring revenue
To get an ARR calculation, you need to compute the monthly recurring revenue for each month (MRR x 12).
Then take the total of these numbers, and multiply by 12 again. This will give you the total annual recurring revenue for your company.
How often should you track this metric?
MRR is usually a lot more important for SaaS businesses than ARR – you need to keep track of MRR more often so that you know when to raise prices or make other changes. ARR is important, but MRR is the most important SaaS metric.
8. Free MRR
Free MRR (Magic Number) is the total amount of free subscribers that you have converted into paying customers.
Since free subscribers are not bringing in any revenue, it’s useful to see how much money you’d be making if they didn’t even exist.
Why this SaaS Free MRR metric is important?
Free MRR is a good indicator of how much money your company can make each month without charging customers.
If you don’t get a lot of free subscribers, you’ll likely have trouble bringing in the revenue that the business needs. Keep track of this metric monthly or quarterly.
How to calculate free MRR
Take the total number of paid subscribers, then subtract this from the total subscriber count for that month.
This will tell you how much money you would have made, had all your free subscribers not been active.
9. ARPU by Customer Type
Annual Recurring Revenue per User shows the average revenue that each customer is paying for each month.
It’s computed by taking your MRR and dividing it by the number of users in each month. Since a new user is not bringing in any revenue, this is the same as the Free MRR.
Why this SaaS ARPU metric is important?
The ARPU metric shows you how much money your company can make each month, with the users that are paying you.
It’s important that your customers are paying you what they’re willing to pay, because if they’re not paying too much, then their churn will be lower and not affect your MRR, while still giving you incoming customers.
How to analyze your SaaS ARPU
Add up the MRR for each month, and divide by the number of users. This will tell you how much money is coming in from each user.
Subtract the Free MRR (Magic Number) from this number, and you’ll have your monthly ARPU.
Keep track of this metric monthly or quarterly depending on how often your company changes its prices or introduces new features.
10. Monthly Active Users (MAU)
Monthly Active Users is a less important metric, but still necessary to track. MAU represents the number of unique people signing up for your service each month including those that become inactive before the end of their subscription.
This metric tells us how engaged our customers are with our product and software.
Why this SaaS MAU is important?
Monthly Active Users is not as important of a metric as MRR or ARPU, but still shows you how well your product is attracting new customers.
If your MAU number is too low, you may want to consider lowering your prices to attract more customers.
How to calculate SaaS Monthly Active Users?
Take the total subscribers in the month, and divide by the number of months that they’ve been subscribed for. This will tell you how many unique users have subscribed.
11. Total Revenue per Monthly Active Users (TRPAUM)
Total revenue per monthly active user (TRPAUM) is an important metric that helps us gauge how efficient we are at converting customers into revenue.
It shows us how much revenue each new customer brings in when they sign up.
Why this SaaS TRPAUM is important?
If you can’t convert your customers into revenue, then you won’t be able to sustain the business. You’ll need a higher MRR rate to successfully grow your business.
The TRPAUM metric tells us how much revenue our customers are generating at a given point in time.
How to Calculate your SaaS TRPMAU
Subtract the total customer’s churn rate from the total revenue for that month.
This tells us how much money each customer is bringing in, on average.
12. Customer Acquisition Cost (CAC)
The customer acquisition cost (CAC) is a measure of how much it costs to get a new SaaS user to subscribe. It is the total cost of acquiring a new customer.
This doesn’t include the cost of writing content and promoting your product, which is why this metric is important.
Why this SaaS CAC is important?
Your goal as a SaaS business is to grow this metric. If you don’t keep your CAC within certain limits, you’ll have trouble bringing in the revenue that you need. To ensure this happens, you should track this metric monthly or quarterly.
How to analyze your SaaS CAC
Add up the marketing costs, paid advertising costs and sales costs. Divide by the number of new subscribers for that month.
13. Free CAC
Free CAC is the total amount of money spent on acquiring free subscribers without converting them into paying customers.
Since a free subscriber is not bringing in any revenue, it’s useful to see how much money you’d be losing if they didn’t even exist.
Why this SaaS Free CAC metric is important?
Free CAC is a good indicator of how much money your company can make each month without charging customers. If you don’t get a lot of free subscribers, you’ll likely have trouble bringing in the revenue that the business needs. Keep track of this metric monthly or quarterly.
How to calculate free CAC?
Take the total number of free subscribers, then subtract this from the total subscriber count for that month.
This will tell you how much money you would have spent, had all your free subscribers not been active.
14. New Customers per Month
New customer in-bound rate, also known as the “new customers per month” metric, gives us an idea how successful our marketing and sales efforts are.
In general, customers should be continually finding new ways to engage with your product and software.
How to analyze your SaaS new customers per month
Take the total number of new subscribers in a month, and divide by the number of months that they’ve been subscribed for. This will tell you how many unique customers signed up.
15. LTV/CAC Ratio
Lifetime Value over Customer Acquisition cost metric is a helpful way of measuring the efficiency of your marketing efforts.
It tells us how much money we’re making compared to what it takes to acquire our new customers. A high LTV/CAC will indicate you’re efficiently converting customers into paying customers.
Why this SaaS LTV/CAC Ratio is important?
Knowing your LTV/CAC ratio will tell you whether or not you’re making money with your business, based on the number of people that are signing up for your product.
It’s also important to know whether or not your new customers are coming in at a good price, as well. If your LTV/CAC is high, it’s a good indicator that you’ve optimized your marketing efforts.
How to calculate your SaaS LTV/CAC Ratio
Subtract the CAC from the LTV. This will tell you how much customer acquisition costs or lifetime value (LTV) your company bringing in per customer.
The LTV of a customer is the total amount of money that a new customer brings in over the course of their lifetime with your company
16. Revenue per Employee (RE/E)
RE/E is a commonly used metric that calculates how valuable each employee is to your company’s growth. It is calculated by dividing total revenue by the number of employees.
This metric tells us how much money each employee is responsible for, and we’re interested in this because it tells us that our company is becoming more efficient over time, as a higher RE/E typically indicates.
Why this SaaS RE/E is important?
A higher RE/E will indicate an improvement in your company’s efficiency and effectiveness. This metric can work in conjunction with other metrics. It’s also a good indicator of whether or not your employees are doing their job correctly.
How to calculate your SaaS RE/E?
Take the total revenue for the month, and divide it by the number of employees for that month. This tells you how much money each employee generated for the company for that particular month.
17. Customer Acquisition Cost (CAC) per Lead
Customer acquisition cost (CAC) per lead is a measure of how much it costs your business to obtain a new lead.
CAC per lead tells you how much money you’re spending on advertisements and content in order to get a new SaaS customer.
How to analyze your SaaS CAC/Lead metric?
Calculate the total number of leads you have, then divide by the number of customers that signed up from those leads.
18. Leads by Lifecycle Stage
Lead Lifecycle gives you an idea of whether or not your marketing efforts are working. It tracks the number of leads that have gone through each phase of engagement and conversion.
Why this SaaS lead lifecycle is important?
Knowing your lead lifecycle will tell you what stage most of your business is in, at any given time. It’s also a good indicator of whether or not your advertising campaign is generating a lot of new leads for your business. The more leads that go into each phase, the better.
How to calculate your SaaS lead lifecycle?
This metric is calculated by tracking each individual lead that comes into the business. You’ll see a lot of different metrics and analytics across your business, which will help you understand where each of your leads are at in their journey with you.
How to analyze this data?
Add up the total number of new leads, then divide by the total number of new leads for that month. This should give you some insight into how many leads are going through each stage.
19. Customer Health Score
Customer Health Score is a metric that gives an idea of how happy your customers are. Every customer engagement is tracked and given a Health Score, which is the total number of mentions multiplied by the number of unique customers who used that mention.
Why this SAA S Customer Health Score is important?
Knowing your customer health score will tell you how satisfied your customers are with your product or service.
It’s also an indicator of whether or not you’ve provided good customer support to them. A high score indicates that your customers are happy with what you’re doing and how you’re treating them.
How to calculate your SaaS Customer Health Score?
Take the total number of mentions your customers made, add it up, and divide by their unique monthly subscriber count.
This will represent how many times each customer made a mention of your product or service in that month.
20. Net Sales
Net sales is a metric that’s tracking the value of each SaaS customer over time. The metric takes the total revenue for a given period and subtracts out your cost of goods sold (COGS).
It’s a measure of how much money you made from the business in that given period.
Why this SaaS Net Sales is important?
Net sales is an indicator of how much money your business is making. It’s a powerful tool to see how much money your business is actually making each month.
It also gives us an idea of how much we’re spending on our products and services.
If we spend less than we’re making, it’s a good indicator that our businesses are more efficient, because more time can be spent on actual product development and marketing, rather than administration and marketing.
How to calculate your SaaS Net Sales?
Take the total revenue for a given period of time and subtract COGS. It will tell you how much money you’re actually making each month.
How to analyze this data?
This metric can help you see exactly how much money your SaaS business is making. It’s also a good indicator of how much staff and marketing effort should be allocated towards your product.
Productivity increases when a team becomes more efficient at creating value in your company.
For instance, if your developers can build double the features in half the time, then your productivity has increased by 100%.
Productivity is measured by dividing the number of features created by the amount of time spent developing them.
How to calculate your SaaS Productivity metric?
Take the number of features created by the team each month, then divide by the amount of time spent developing them. This will tell you how much value you create per hour, or per developer (for SaaS teams).
SaaS Metric FAQ
1. What is a SaaS metric?
A SaaS metric is a measure of a top-level attribute of your business, such as revenue or customer health. It can also be any other metric used to track the success of your product or service.
While there are many types of SaaS metrics, this post will focus on the following types: business metrics, product metrics, and marketing metrics.
2. What is a Business Metric?
A business metric measures an aspect of your business in terms of how it impacts the long-term success of your company.
Business metrics include things like customer acquisition cost per new customer (CAC), customer health score, and net sales.
3. What is a Product Metric?
A product metric measures an aspect of your software or service that impacts the user experience and quality of your product, including things like number of active users and time on site (unique visitors).
4. What is a Marketing Metric?
A marketing metric is used to estimate the effectiveness of your advertising and marketing efforts. Metrics such as leads generated by lifecycle stages and net sales tracks how much money your business is making.
5. What are some examples of SaaS metrics?
The following list contains some of the most common SaaS metrics:
Net Sales: This metric measures the amount of money your company makes each month from customers across all customers.
Customer Health Score: This metric calculates the happiness of your customers. It’s a measure of how happy your customers are with your product or service and how well you’ve treated them throughout their experience.
New Leads: This metric measures how many new customers or potential customers you bring in each day or week.
New Customers: This metric measures how many new paying users you’ve acquired each month, whether they’re new to the product or existing users who are just now becoming paying users.
6. What do these metrics mean?
A SaaS metric can be used to measure many different things, depending on how you calculate them and what they represent.
For example, the net sales metric could represent the total money made that month or the amount of money spent on each customer.
Make sure you know what each one means before using it as a key performance indicator (KPI).
7. What is the difference between a SaaS metric and a ratio?
A ratio is used to compare two pieces of data to each other. For example, a ratio of 5/10 would mean that you’ve completed five tasks but only 10 hours has passed.
A SaaS metric measures one piece of information without comparing it to another value. For example, a customer retention rate would tell you how many users returned to the product in that month.
8. Why are SaaS metrics important?
Metrics are one of the most important tools you can use to increase the productivity and efficiency of your business.
Tracking your metrics allows you to see if your business is growing or shrinking, whether or not your product is effective, and what marketing strategies are working best.
9. Why is it important to track SaaS metrics?
Metrics are an important part of managing your business. Tracking metrics allows you to make informed decisions about how your business is performing and gives you the information you need to increase productivity and make better products.
10. How can I find metric data for my industry?
There are many websites that offer free SaaS metrics data, including Mattermark, Yodle, Google Analytics, and many others.
If you’re looking for industry specific data, you can create your own custom spreadsheet and customize it to your needs. You can also search online or contact your vendor or software provider to get the data you need.
11. Why are SaaS metrics important?
Metrics are an important part of managing your business. Tracking metrics allows you to see if your business is growing or shrinking, whether or not your product is effective, and what marketing strategies are working best.
12. How do I calculate my SaaS metric?
To calculate your SaaS metric, simply find the value that you want to measure. For instance, if you want to track the amount of money your company makes each month, then you should divide how much money is made by how many times a month it’s made.
Let’s assume that your company makes $100,000 each month and there are 10 customers paying the product each month. The metric would be (100,000/10) = $1 million dollars.
13. What is an example Saas Customer Lifetime Value (CLV)?
CLV is a metric that measures the value of a certain customer over his or her lifetime. For instance, if a customer signs up for your service at $50/month, and the customer is expected to be with you for 3 years, then CLV will be $50/month x 36 months = $1,800 in revenue from one customer alone.
14. What is an Example of Customer Acquisition Cost (CAC)?
CAC is a metric that measures your cost to acquire new customers. For example, if you spend $5 to acquire a new customer, but only make $ from each customer over the course of their lifetime, then your CAC is $7 / $5 = 1.4x. This means that for every dollar you spend acquiring new customers, you will only make about 1.4x in revenue from them. I
deal CAC is generally less than 3-4x to be considered efficient (i.e., low cost of acquisition and ability to turn a profit).
15. What is Net Promoter Score?
Net Promoter Score indicates the likelihood that a customer will recommend your company to another person, based on his or her past experience with the company. The Liker score is a measure of the likelihood that a recent customer will re-up for another year. The NPS is calculated as:
Liker / (1 + Liker)