Finding the right metrics for your SaaS business
As your SaaS startup grows, it becomes increasingly important to focus on the right metrics. With so many different metrics and KPI's to track, it can be difficult to know which SaaS metrics are the most important.
SaaS startups have a lot of factors to juggle as they scale. They need to grow their team while maintaining a high level of customer satisfaction and delivering a product that meets user needs. SaaS companies also need to be financially sustainable, generating enough revenue to cover their costs and support future growth. With so many moving parts, it can be difficult to know which metrics to focus on.
However, there are a few key metrics that all SaaS startups should keep an eye on.First, SaaS companies need to track their customer acquisition costs. This metric tells you how much it costs to acquire each new customer, and it's crucial for understanding the financial sustainability of your business. If your customer acquisition costs are too high, it will be difficult to generate enough revenue to cover your costs and support growth.Second, SaaS startups need to monitor their customer churn rate. This metric measures the percentage of customers who cancel their subscription or stop using your product over a certain period of time. A high churn rate indicates that your customers are not happy with your product and may be at risk of switching to a competitor.
Finally, SaaS companies should keep an eye on their lifetime value (LTV). This metric measures the total revenue that a customer generates over the course of their relationship with your company. A high LTV indicates that your customers are sticking around and using your product regularly, which is essential for long-term financial sustainability.SaaS startups have a lot on their plate, but by focusing on these key metrics, they can increase their chances of success.
The key SaaS metrics 2024
Financial SaaS metrics
Average revenue per account (ARPA) – This metric measures the average revenue you generate from each customer account. A high ARPA indicates that your SaaS product is valuable to customers and that they are using it regularly.
Revenue per user (ARPU) – This metric measures how much revenue you generate from each individual user. A high ARPU indicates that your SaaS product is valuable to customers and that they are using it regularly.
Monthly recurring revenue (MRR) – This metric measures the amount of revenue you can expect to generate each month from recurring subscriptions. A growing MRR is a sign that your SaasS product is gaining popularity and that customers are finding value in it.
Customer & product SaaS metrics
Monthly active users (MAU) – This metric measures the number of people who use your SaaS product each month. A high MAU indicates that your SaaS product is gaining popularity and that customers are finding value in it.
Daily active users (DAU) – This metric measures the number of people who use your SaaS product each day. A high DAU indicates that customers are finding value in your product and are using it regularly
Average sessions per day – This metric measures how often people use your SaaS product. A high average sessions per day indicates that customers are finding value in your product and are using it regularly.
Net promoter score (NPS) – This metric measures how likely your customers are to recommend your SaaS product to others. A high NPS score indicates that customers are happy with your product and are likely to stick around for the long term.
Customer satisfaction (CSAT) – This metric measures how satisfied your customers are with your SaaS product. A high CSAT score indicates that customers are happy with your product and are likely to stick around for the long term.
Trial conversion rate – This is the percentage of people who sign up for a free trial of your saas product and then go on to become paying customers. A high trial conversion rate is a sign that your saas product is appealing to potential customers and that they are finding value in it.
Customer churn rate / Customer Retention Rate – This is the percentage of customers who cancel their subscription or stop using your SaaS product. A high customer churn rate can be a sign that something is wrong with your product or pricing. In corralation with customer churn rate, many SaaS businesses also track customer retention rate. Interested in learning more? Read our guide on retention strategies for SaaS businesses.
Marketing & sales SaaS metrics
Annual contract value (ACV) – This metric measures the average amount of money that customers spend on your SaaS product each year. A high ACV indicates that your SaaS product is valuable to customers and that they are likely to stick around for the long term.
Customer acquisition cost (CAC)This metric measures how much it costs you to acquire new customers. A high CAC can eat into your profits and make it difficult to scale your business.
Lifetime Value (LTV) - This metric measures how much revenue you can expect to generate from each customer over the lifetime of their relationship with your product. A high LTV is a sign that your SaaS product is valuable to customers and that they are likely to stick around for the long term.
LTV/CAC ratio – This metric measures the ratio of your customer's lifetime value to your customer acquisition cost. A high LTV/CAC ratio indicates that your product is a good investment and that customers are likely to stick around for the long term.
Funnel conversion rate – This is the percentage of people who go through your sales & marketing funnel and end up becoming paying customers. A high funnel conversion rate indicates that your marketing funnel works and you have an efficient way of attracting potential buyers of your product.
Of course, these are not the only metrics you should track when building a SaaS business. However, these are some of the most important metrics to keep an eye on. By tracking these data points, you can get a clear picture of how their product and marketing machinery is performing and make necessary changes to improve user experience.
Choosing the important key metrics to track as a SaaS
Any business needs to track a variety of key metrics in order to be successful. But with so many different options available, it can be tough to decide which ones are the most important. Typically, the most important metrics for a SaaS business fall into three main categories: customer acquisition, customer retention, and financial stability.
Customer acquisition metrics help SaaS businesses track how well they are acquiring new customers. This includes metrics like customer lifetime value, customer acquisition costs, and conversion rates. Customer retention metrics, on the other hand, focus on keeping existing customers happy and engaged. These might include things like churn rate, customer satisfaction scores, and Net Promoter Scores. Finally, financial stability metric give SaaS businesses a clear picture of their overall financial health. This could include gross margin, burn rate, and runway.
There is no one-size-fits-all answer when it comes to choosing the right key metrics for a SaaS business. However, by focusing on these three main areas, SaaS businesses can get a good sense of where they need to improve in order to be successful.
