SaaS Growth Metrics: The Essential KPIs Every Founder Should Track

SaaS businesses live and die by their metrics. The right KPIs illuminate what's working, what's broken, and where to focus. According to SaaS Capital, companies that track the right metrics grow 30% faster than those that don't. This guide covers the essential SaaS growth metrics every founder and operator should understand.

The Core SaaS Metrics

Monthly Recurring Revenue (MRR)

Definition: Predictable revenue normalized to a monthly amount.

Formula:

MRR = Sum of all monthly subscription revenue

For annual subscriptions:

Monthly contribution = Annual contract value / 12

MRR Components:

Annual Recurring Revenue (ARR)

Definition: Annualized recurring revenue.

Formula:

ARR = MRR × 12

Note: ARR is typically used for companies above $1M MRR or with primarily annual contracts.

Growth Rate

Definition: Rate of revenue growth over time.

Formulas:

Month-over-Month Growth = (MRR this month - MRR last month) / MRR last month × 100

Year-over-Year Growth = (ARR this year - ARR last year) / ARR last year × 100

Benchmark by Stage:

Customer Acquisition Metrics

Customer Acquisition Cost (CAC)

Definition: Cost to acquire one new customer.

Formula:

CAC = (Sales + Marketing costs) / New customers acquired

Example:

• Sales costs: $50,000
• Marketing costs: $30,000
• New customers: 40
• CAC = $80,000 / 40 = $2,000

Variations:

• Blended CAC: All costs / all customers
• Paid CAC: Paid costs / paid-acquired customers
• Organic CAC: Organic costs / organic-acquired customers

CAC Payback Period

Definition: Months to recover customer acquisition cost.

Formula:

CAC Payback = CAC / (ARPA × Gross Margin)

Example:

• CAC: $2,000
• Monthly ARPA: $200
• Gross Margin: 80%
• CAC Payback = $2,000 / ($200 × 0.8) = 12.5 months

Benchmark:

LTV:CAC Ratio

Definition: Lifetime value compared to acquisition cost.

Formula:

LTV:CAC = Customer Lifetime Value / Customer Acquisition Cost

Benchmark:

Customer Lifetime Metrics

Customer Lifetime Value (LTV)

Definition: Total revenue expected from a customer. For strategies to increase LTV, see our comprehensive LTV guide.

Formula (Simple):

LTV = ARPA × Customer Lifetime
LTV = ARPA / Monthly Churn Rate

Formula (with Gross Margin):

LTV = ARPA × Gross Margin × Customer Lifetime

Example:

• Monthly ARPA: $200
• Monthly Churn: 2%
• Gross Margin: 80%
• LTV = $200 × 0.8 / 0.02 = $8,000

Average Revenue Per Account (ARPA)

Definition: Average monthly revenue per customer.

Formula:

ARPA = Total MRR / Number of customers

Segment ARPA to understand customer mix:

Retention Metrics

Churn Rate

Definition: Rate at which customers or revenue is lost. Learn how to reduce customer churn with proven strategies.

Logo Churn:

Logo Churn = Customers lost / Starting customers × 100

Revenue Churn:

Revenue Churn = MRR lost / Starting MRR × 100

Benchmark:

Gross Revenue Retention (GRR)

Definition: Revenue retained excluding expansion.

Formula:

GRR = (Starting MRR - Churn - Contraction) / Starting MRR × 100

Maximum: 100% (expansion not counted)

Benchmark: 90%+ is healthy

Net Revenue Retention (NRR)

Definition: Revenue retained including expansion. For a deep dive, see our complete NRR guide.

Formula:

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

Benchmark:

Why NRR Matters: Companies with 120%+ NRR can grow significantly even without new customers. Strong expansion strategies are key to achieving high NRR.

Efficiency Metrics

Burn Multiple

Definition: Cash burned for each dollar of ARR added.

Formula:

Burn Multiple = Net Burn / Net New ARR

Example:

• Net Burn: $2M
• Net New ARR: $1M
• Burn Multiple = 2x

Benchmark:

Rule of 40

Definition: Growth rate + profit margin should exceed 40%.

Formula:

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

Examples:

• 50% growth + -10% margin = 40 ✓
• 30% growth + 10% margin = 40 ✓
• 20% growth + 5% margin = 25 ✗

Magic Number

Definition: Sales efficiency metric.

Formula:

Magic Number = Net New ARR (Q) / Sales & Marketing Spend (Q-1)

Benchmark:

Quick Ratio

Definition: Growth efficiency accounting for churn.

Formula:

Quick Ratio = (New MRR + Expansion MRR) / (Churn MRR + Contraction MRR)

Example:

• New MRR: $10,000
• Expansion MRR: $3,000
• Churned MRR: $2,000
• Contraction MRR: $1,000
• Quick Ratio = $13,000 / $3,000 = 4.3

Benchmark:

Building a Metrics Dashboard

Executive Dashboard

Operational Dashboard

Metric Calculation Best Practices

Consistency

• Use the same formulas across the company
• Document calculation methodology
• Automate calculations where possible

Segmentation

Break metrics down by:

• Customer segment (SMB, MM, Enterprise)
• Acquisition channel
• Product/Plan
• Geography
• Cohort (signup date)

Cohort Analysis

Track metrics over time for customer groups:

*Projected

Common Metric Mistakes

Mistake 1: Vanity Metrics

Tracking metrics that look impressive but don't drive decisions.

Example: Total signups (instead of activated users)

Mistake 2: Wrong Calculation

Inconsistent or incorrect formulas lead to bad decisions.

Solution: Document and validate all calculations

Mistake 3: No Segmentation

Blended metrics hide important patterns.

Solution: Always segment by customer type, channel, etc.

Mistake 4: Ignoring Leading Indicators

Lagging metrics reveal problems too late.

Solution: Track leading indicators (trial activation, feature adoption)

Getting Started

Phase 1: Foundation (Week 1-2)

1. Define your 5-7 key metrics
2. Document calculation methodology
3. Identify data sources
4. Build initial dashboard

Phase 2: Operationalize (Week 3-4)

1. Automate data collection
2. Set targets
3. Create team dashboards
4. Establish review cadence

Phase 3: Optimize (Ongoing)

1. Analyze trends
2. Identify improvement areas
3. Test changes
4. Refine targets

Conclusion

Metrics are the language of SaaS growth. By understanding and tracking the right KPIs, you can make better decisions, identify problems early, and demonstrate progress to stakeholders.

Key Takeaways:

1. Start with core metrics - MRR, Churn, CAC, LTV, NRR
2. Consistency matters - Same formulas, same sources
3. Segment everything - Averages hide insights
4. Balance leading and lagging - Act early, measure outcomes
5. Connect to action - Every metric should drive decisions

Focus on the metrics that matter most for your current stage and goals.

Frequently Asked Questions

What's the single most important SaaS metric?

Net Revenue Retention (NRR) because it combines retention and expansion into one metric that shows whether your existing customer base is growing or shrinking.

How often should I review metrics?

Daily for operational metrics, weekly for growth metrics, monthly for board-level metrics, quarterly for strategic planning.

What metrics should I share with investors?

ARR/MRR growth, NRR, LTV:CAC, burn multiple, and CAC payback. These demonstrate both growth and efficiency.

Ready to improve your SaaS metrics? Try AskUsers to analyze customer data and identify expansion opportunities that drive NRR.