SaaS Metrics That Matter: A Complete Guide to KPIs

Running a SaaS business without tracking the right metrics is like flying blind. You might be growing, but are you growing profitably? Are you retaining customers? Is your customer acquisition strategy working?

Understanding and tracking the right SaaS metrics is crucial for making informed decisions, attracting investors, and building a sustainable business. This guide covers the essential KPIs every SaaS company should monitor.

Why SaaS Metrics Matter

SaaS businesses operate on a unique model:

• Recurring revenue instead of one-time sales
• Customer lifetime value over transaction value
• Growth efficiency over pure growth
• Retention as important as acquisition

Traditional business metrics don’t capture these nuances. That’s why SaaS-specific metrics exist—to give you a true picture of your business health.

Revenue Metrics

Monthly Recurring Revenue (MRR)

What it is: The predictable revenue your business expects to receive every month from active subscriptions.

Why it matters: MRR is the foundation of SaaS financial planning. It helps you:

• Forecast future revenue
• Track growth trends
• Make hiring and investment decisions
• Communicate with investors

How to calculate:

MRR = Sum of all monthly subscription revenues

Example:

• 10 customers at $100/month = $1,000 MRR
• 5 customers at $200/month = $1,000 MRR
• Total MRR = $2,000

Best practices:

• Track MRR by plan type
• Monitor MRR growth rate (aim for 15-20% monthly)
• Separate new MRR from expansion MRR
• Watch for MRR churn

Annual Recurring Revenue (ARR)

What it is: MRR multiplied by 12, representing yearly recurring revenue.

Why it matters:

• Standard metric for SaaS valuations
• Easier to compare with annual contracts
• Used by investors and acquirers

How to calculate:

ARR = MRR × 12

Example: $10,000 MRR = $120,000 ARR

Revenue Growth Rate

What it is: The percentage increase in revenue over a period.

Why it matters: Shows if your business is scaling effectively.

How to calculate:

Growth Rate = ((Current Period Revenue - Previous Period Revenue) / Previous Period Revenue) × 100

Benchmarks:

• Early stage: 15-20% monthly
• Growth stage: 10-15% monthly
• Mature: 20-40% annually

Customer Metrics

Customer Acquisition Cost (CAC)

What it is: The total cost of acquiring a new customer.

Why it matters: Determines if your acquisition strategy is profitable.

How to calculate:

CAC = (Sales & Marketing Costs) / Number of New Customers

What to include:

• Sales team salaries and commissions
• Marketing spend (ads, content, events)
• Tools and software for sales/marketing
• Overhead allocation

Example:

• $50,000 in sales/marketing costs
• 100 new customers acquired
• CAC = $500

Best practices:

• Calculate CAC by channel
• Track CAC over time
• Aim for CAC payback period < 12 months
• Monitor CAC:LTV ratio (should be 1:3 or better)

Customer Lifetime Value (LTV)

What it is: The total revenue you expect from a customer over their lifetime.

Why it matters: Helps determine how much you can spend to acquire customers.

How to calculate:

LTV = (Average Revenue Per User × Gross Margin %) / Churn Rate

Or simpler:

LTV = Average Revenue Per User × Average Customer Lifespan

Example:

• Average monthly revenue: $100
• Average customer lifespan: 24 months
• LTV = $100 × 24 = $2,400

Best practices:

• Calculate LTV by customer segment
• Update regularly as data improves
• Consider expansion revenue
• Track LTV:CAC ratio (aim for 3:1 or higher)

LTV:CAC Ratio

What it is: Customer lifetime value divided by customer acquisition cost.

Why it matters: Shows if your business model is sustainable.

Benchmarks:

• 3:1 or higher: Healthy, sustainable
• 2:1: Acceptable but risky
• 1:1 or lower: Unsustainable

Example:

• LTV = $2,400
• CAC = $800
• Ratio = 3:1 ✓

CAC Payback Period

What it is: How long it takes to recover the cost of acquiring a customer.

Why it matters: Shorter payback = better cash flow.

How to calculate:

Payback Period = CAC / (MRR × Gross Margin %)

Benchmarks:

• < 12 months: Excellent
• 12-18 months: Good
• > 18 months: Needs improvement

Churn Metrics

Customer Churn Rate

What it is: The percentage of customers who cancel their subscription in a period.

Why it matters: Churn directly impacts revenue and growth.

How to calculate:

Churn Rate = (Customers Lost / Customers at Start of Period) × 100

Example:

• Started month with 100 customers
• Lost 5 customers
• Churn Rate = 5%

Benchmarks:

• < 5% monthly: Excellent
• 5-7% monthly: Good
• > 7% monthly: Needs attention

Best practices:

• Track churn by cohort
• Monitor churn by plan type
• Identify churn reasons
• Calculate revenue churn separately

Revenue Churn Rate

What it is: The percentage of revenue lost from cancellations and downgrades.

Why it matters: More accurate than customer churn for revenue impact.

How to calculate:

Revenue Churn = (MRR Lost / MRR at Start of Period) × 100

Net Revenue Churn (includes expansion):

Net Revenue Churn = ((MRR Lost - MRR Gained) / MRR at Start) × 100

Benchmarks:

• Negative net churn: Excellent (growing without new customers)
• < 2% monthly: Good
• > 5% monthly: Critical issue

Churn by Cohort

What it is: Tracking churn rates for groups of customers acquired in the same period.

Why it matters: Shows if product quality or onboarding is improving.

Example:

• January cohort: 10% churn after 6 months
• June cohort: 5% churn after 6 months
• ✓ Improvement in product/onboarding

Growth Metrics

Magic Number

What it is: A measure of sales and marketing efficiency.

Why it matters: Shows if you can scale profitably.

How to calculate:

Magic Number = (Net New ARR in Quarter / Sales & Marketing Spend Previous Quarter)

Benchmarks:

• > 0.75: Efficient, can scale
• 0.5-0.75: Good efficiency
• < 0.5: Inefficient, needs optimization

Rule of 40

What it is: A benchmark combining growth rate and profitability.

Why it matters: Balances growth and profitability for sustainable scaling.

How to calculate:

Rule of 40 = Revenue Growth Rate % + Profit Margin %

Benchmarks:

• > 40%: Excellent
• 30-40%: Good
• < 30%: Needs improvement

Example:

• 30% revenue growth
• 15% profit margin
• Rule of 40 = 45% ✓

Net Revenue Retention (NRR)

What it is: Revenue from existing customers including expansion, minus churn.

Why it matters: Shows if you’re growing within your customer base.

How to calculate:

NRR = ((Starting MRR + Expansion - Churn - Downgrades) / Starting MRR) × 100

Benchmarks:

• > 100%: Excellent (growing without new customers)
• 90-100%: Good
• < 90%: Needs improvement

Product Metrics

Monthly Active Users (MAU)

What it is: The number of unique users who engage with your product in a month.

Why it matters: Shows product adoption and engagement.

Best practices:

• Define “active” clearly (login, feature use, etc.)
• Track MAU growth rate
• Compare to total users
• Segment by user type

Feature Adoption Rate

What it is: The percentage of users using a specific feature.

Why it matters: Shows if new features are valuable.

How to calculate:

Adoption Rate = (Users Using Feature / Total Active Users) × 100

Product-Market Fit Score

What it is: A measure of how well your product satisfies market demand.

Why it matters: Indicates if you’re building something people want.

How to measure:

• Survey: “How disappointed would you be if this product disappeared?”
• > 40% “very disappointed”: Strong product-market fit
• < 40%: Needs improvement

Operational Metrics

Customer Support Tickets

What it is: Number of support requests per period.

Why it matters: Indicates product issues and customer satisfaction.

Best practices:

• Track tickets per customer
• Monitor resolution time
• Categorize by issue type
• Track trends over time

Net Promoter Score (NPS)

What it is: A measure of customer satisfaction and loyalty.

Why it matters: Predicts growth and retention.

How to calculate:

• Survey: “How likely are you to recommend us?”
• Scale: 0-10
• Promoters (9-10): Loyal enthusiasts
• Passives (7-8): Satisfied but unenthusiastic
• Detractors (0-6): Unhappy customers

NPS = % Promoters - % Detractors

Benchmarks:

• > 50: Excellent
• 30-50: Good
• < 30: Needs improvement

Financial Metrics

Gross Margin

What it is: Revenue minus cost of goods sold (COGS).

Why it matters: Shows profitability of core product.

How to calculate:

Gross Margin % = ((Revenue - COGS) / Revenue) × 100

What to include in COGS:

• Hosting and infrastructure
• Payment processing fees
• Customer support (if significant)
• Third-party service costs

Benchmarks:

• > 80%: Excellent
• 70-80%: Good
• < 70%: Needs improvement

Burn Rate

What it is: The rate at which you’re spending cash.

Why it matters: Shows runway and sustainability.

How to calculate:

Monthly Burn Rate = Starting Cash - Ending Cash

Runway:

Runway (months) = Current Cash / Monthly Burn Rate

Best practices:

• Track gross burn (total spending)
• Track net burn (spending minus revenue)
• Maintain 12-18 months runway
• Plan for fundraising

Building Your Metrics Dashboard

Essential Metrics (Track Weekly)

• MRR and ARR
• New customers
• Churn rate
• CAC
• LTV

Growth Metrics (Track Monthly)

• Revenue growth rate
• NRR
• Magic number
• Rule of 40

Product Metrics (Track Monthly)

• MAU
• Feature adoption
• Support tickets

Financial Metrics (Track Monthly)

• Gross margin
• Burn rate
• Runway

Common Mistakes to Avoid

1. Tracking too many metrics: Focus on what matters
2. Ignoring context: Compare metrics to benchmarks
3. Not segmenting: Aggregate data hides insights
4. Infrequent tracking: Weekly/monthly cadence is essential
5. Vanity metrics: Focus on actionable metrics

Conclusion

Tracking the right SaaS metrics is essential for building a successful business. Start with the fundamentals—MRR, CAC, LTV, and churn—then expand your dashboard as you grow.

Remember: metrics are tools for decision-making, not goals themselves. Use them to understand your business, identify problems, and guide strategy. The companies that master SaaS metrics are the ones that build sustainable, profitable businesses.

Focus on metrics that are:

• Actionable: You can do something about them
• Accurate: Based on reliable data
• Aligned: Support your business goals
• Accessible: Easy to understand and communicate

Start tracking today, and you’ll be on your way to data-driven growth.