Dear SaaStr: What Are The Two Most Important Marketing KPIs on The Way to $10m ARR?
For an early-stage SaaS business at $3M ARR driving to $10m ARR, the two most critical marketing KPIs to track are Pipeline Contribution* and Customer Acquisition Cost (CAC) Payback Period. Here’s why:
1. Pipeline Contribution
*Why It Matters**: At $3M ARR, marketing’s primary job is to drive pipeline. You need to know exactly how much of your sales pipeline is coming from marketing efforts (e.g., inbound leads, demand gen campaigns, content marketing). This KPI ensures marketing is directly tied to revenue growth.
*What to Track**:
- Percentage of pipeline generated by marketing (e.g., 50% of total pipeline should come from marketing).
- Marketing Qualified Leads (MQLs) to Sales Qualified Leads (SQLs) conversion rates.
- Cost per MQL or SQL to ensure efficiency.
**How to Use It**: If marketing isn’t contributing at least 40-50% of the pipeline, you’ve got a problem. Either your campaigns aren’t working, or you’re overly reliant on outbound sales. Fix this by doubling down on what’s working—whether that’s paid ads, SEO, or webinars.
2. CAC Payback Period
– **Why It Matters**: CAC Payback Period tells you how long it takes to recover the cost of acquiring a customer. For early-stage SaaS, this is a key efficiency metric. If your CAC payback is too long, you’re burning cash too fast, which is unsustainable at this stage.
– **What to Track**:
- CAC Payback Period = CAC ÷ Monthly Gross Margin per Customer.
- Aim for a payback period of **12 months or less** for SMBs, and **15-18 months** for enterprise customers
– **How to Use It**: If your CAC payback is too high, you need to either reduce acquisition costs (optimize campaigns, improve conversion rates) or increase ACV (upsells, better pricing).
Now look, CAC payback can be gamed. Many marketers throw customers acquired for free into CAC. You can’t. You have to at least try to break them out from paid acquisition -> paid customers. And there are other ways to game it. But at some level, what matters most is that you get “profitable” on your customers in a given agreed-upon time frame.
The best marketers agree on the time frame (CAC Payback Period) and aggressively manage their spend to it.
Why These Two?
These KPIs are directly tied to growth and efficiency, which are the two most important levers at $3M ARR. If marketing isn’t driving enough pipeline, sales will stall. If your CAC payback is too long, you’ll run out of cash before you can scale.
