Dear SaaStr: What Are The Top 10 Metrics For SaaS Companies To Track?
The key KPIs for SaaS companies revolve around growth, retention, efficiency, and customer success. Here are the most critical ones:
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ARR (Annual Recurring Revenue): This is your North Star. It’s the total recurring revenue you’re generating annually. Every SaaS company lives and dies by ARR growth—if you’re not growing ARR, you’re not scaling.
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NRR (Net Revenue Retention): This measures how much revenue you retain from existing customers, including upsells and cross-sells, minus churn. Top SaaS companies aim for 120%+ NRR for enterprise customers and 110%+ for SMBs. If your NRR is below 100%, you’re losing ground and need to acquire new customers just to stay flat.
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GRR (Gross Revenue Retention): This is the percentage of revenue retained before upsells. It’s the floor of your business. Investors care deeply about GRR because it shows how sticky your product is. Anything below 90% is a red flag.
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CAC (Customer Acquisition Cost): This is how much you spend to acquire a new customer. It’s critical to keep this efficient, especially in tougher markets. A good CAC Payback Period is under 12 months for SMBs and under 18 months for enterprise.
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LTV (Lifetime Value): This is the total revenue a customer generates over their lifetime. It’s often compared to CAC. A healthy SaaS business should have an LTV:CAC ratio of at least 3:1.
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Churn Rate: This is the percentage of customers or revenue you lose in a given period. For enterprise SaaS, aim for less than 10% annual churn. For SMBs, it’s often higher, but anything above 20% is a problem.
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Gross Margin: SaaS businesses should have gross margins of 70-80%. Anything lower suggests you’re too reliant on services or have inefficiencies in your delivery model.
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NPS (Net Promoter Score): This measures customer satisfaction and loyalty. While it’s not a direct financial metric, it’s a leading indicator of retention and upsell potential.
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DAU/MAU (Daily Active Users/Monthly Active Users): This measures product stickiness and engagement. A high DAU/MAU ratio shows that users find your product essential.
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Expansion Revenue: This is the revenue from upselling or cross-selling to existing customers. It’s a key driver of NRR and overall growth.
If you’re early-stage, focus on ARR growth, churn, and CAC. As you scale, NRR and GRR become even more critical.
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