There are three types of metrics that should be followed closely.

1. VOLUME METRICS - Tracks the volume of leads, opportunities, deals and revenue.

2. CONVERSION METRICS - Shows how effectively you are progressing leads and opportunities through the sales cycle.

3. TIME METRICS - Shows how long it takes to move leads and opportunities through the stages of the sales cycle

Top SaaS Metrics

Growth

The starting point for understanding a SaaS business is revenue growth – the best proof of product-market fit.

1. MRR or ARR - Annual Recurring Revenue (ARR) is the standard for SaaS companies that sell annual subscription contracts, or Monthly Recurring Revenue (MRR) for those selling monthly subscriptions.
2. CMGR - The best way to measure growth in MRR is to first normalize it using a CAGR calculator but on a monthly basis. This is called Compound Monthly Growth Rate (CMGR).
3. Customer Concentration - Is growth being driven by a few big contracts or many small ones? If the largest customer is less than 10% of revenue, that indicates low customer concentration which is good.

Retention

Analyzed by grouping customers into “cohorts” according to their sign-up period (month, quarter or year), then tracking what percentage of the original cohort remains over time.

1. Net Revenue Retention (NRR) - Measures how much revenue a cohort is generating in each period relative to its original size.
2. Logo Retention - Measures the percent of customers that stay active (non-churned).

Sales Efficiency / Unit Economics

It’s important to analyze sales efficiency to ensure that growth is efficient and sustainable.

1. New Sales ARR vs S&M Expense - How much did the Sales & Marketing teams spend compared to how much New Sales ARR was added in the same period? Ideally, New Sales ARR is equal to or greater than S&M spending.
2. Customer Acquisition Cost (CAC) - divides S&M expense in the preceding period (month or quarter) by the number of new customers in the current period.
3. New ACV vs CAC - It’s useful to compare Annual Contract Value (ACV) of new customers to their CAC. Ideally, ACV is greater than CAC, meaning that customer acquisition does not cost more than first year’s revenue.
4. CAC Payback - To determine how many months it takes for a customer to produce enough gross profit to pay back its CAC. Lower margin products with high CAC do poorly on payback.
5. Magic Number - Magic Number is the Net New ARR in a period divided by S&M expense from the prior period. Ideally, the ratio is greater than one.

Margins

1. Gross Margin - Reflects a company’s margin after subtracting the cost of goods sold (COGS) from revenue. For SaaS companies, COGS typically consist of hosting costs, any data or software needed for the product to operate, and the cost of frontline operations.
2. Lifetime Value (LTV) - cumulative gross profit contribution, net of CAC, of the average customer in a cohort.

Engagement

1. DAU/MAU - The ratio of daily active users to monthly active users. A good metric for most SaaS startups is 40% DAU/MAU during non-holiday weekdays, meaning that the typical monthly user visits the site at least two weekdays per week or 8 times per month.
2. DAU/WAU - The ratio of daily active users to weekly active users. A good metric for most SaaS startups is 60% DAU/WAU during non-holiday weekdays, meaning that the typical weekly user visits the site 3 out of 5 weekdays.

Note: In both cases, SaaS startups may want to remove the noise created by free users. The resulting metric of “Paid Engagement” would show activity levels for paid seats.

Performance Metrics

More SaaS metrics to measure the efficiency of revenue growth.

𝗠𝗲𝗮𝘀𝘂𝗿𝗲 𝗮𝗻𝗱 𝗨𝘀𝗲: those performance metrics that should be a primary source of insights for decision making including when to increase investment in customer acquisition

𝗜𝗻𝘀𝘁𝗿𝘂𝗺𝗲𝗻𝘁 𝗮𝗻𝗱 𝗨𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱: those performance metrics that should be instrumented, calculated, and analyzed to help inform the potential for increasing investment to reach the next stage of growth...or the need to fix before increasing investment

𝗘𝗻𝘁𝗲𝗿𝗽𝗿𝗶𝘀𝗲 𝗩𝗮𝗹𝘂𝗲 𝗖𝗿𝗲𝗮𝘁𝗶𝗻𝗴 𝙍𝙚𝙫𝙚𝙣𝙪𝙚 𝙋𝙚𝙧𝙛𝙤𝙧𝙢𝙖𝙣𝙘𝙚 𝗠𝗲𝘁𝗿𝗶𝗰𝘀 - 𝗕𝘆 𝗦𝘁𝗮𝗴𝗲:

< $𝟭𝗠 𝗔𝗥𝗥

• Establishing Product Market Fit is priority #1
• % of customers who are retained and referenceable
• CARR growth rate (Committed Annual Recurring Revenue)

$𝟭𝗠 - $𝟱𝗠

• CARR Growth Rate
• Logo Retention
• CAC Payback Period
• New CAC Ratio
• Gross Dollar Retention
• Net Dollar Retention
• CLTV:CAC

$𝟱𝗠 - $𝟮𝟱𝗠

• CARR Growth Rate
• CAC Payback Period
• New, Blended and Expansion CAC Ratio
• Logo Retention
• Gross Dollar Retention
• Net Dollar Retention
• CLTV:CAC
• Cohort analysis of all of the above

> $𝟮𝟱𝗠

• CARR Growth Rate
• CAC Payback Period
• New, Blended and Expansion CAC Ratio
• Logo Retention
• Gross Dollar Retention
• Net Dollar Retention
• CLTV:CAC
• Cohort analysis of all above

Marketing Metrics

SaaS Sales Funnel

Here we want to explain the key SaaS sales metrics revealing insights regarding your sales team efficiency, the validity of the pricing model, and most importantly – the customer lifetime with your service.

SaaS Metrics by Team

Breaking this out by team looks something like this:

Essential SaaS Metrics

The diagram below summarizes customer states in a lifecycle, and critical metrics to evaluate the performance of a SaaS company using a product-led GTM approach.

Core SaaS Metrics

** CBI includes, but is not limited to, the following metrics:

• DAU/MAU, or the number of logins over a period of time
• Average time spent in-product per session
• Number of completed core use cases
• Number of features interacted with
• Engagements with in-product notifications

Resources:

https://www.saasgrid.com/ - Create SaaS dashboards easily

Sources:

https://augurian.com/blog/saas-metrics/

https://jelvix.com/blog/saas-business-metrics

https://sacks.substack.com/p/the-saas-metrics-that-matter

https://smile.amazon.com/How-Get-10M-ARR-Beyond-ebook/dp/B09PV114F7

https://www.amazon.com/Mastering-Product-Experience-SaaS-Personalized-ebook/dp/B078YY4Y93/