What is the key SaaS metric that every SaaS Company should obsess about?

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JASON LEMKIN

I’m going to suggest a slightly different take.

Beyond MRR growth + managing the burn rate — which really are all that matters … you should obsess over improving every key metric and KPI.

But not obsess about the baseline and absolute metrics and ratios.  First just establish your baseline, for better or worse, in each key metric.  Then once you’ve measured then, set goals of improving each at least 20% (or whatever amount) annually, with interim quarterly goals:

  • Obsess about decreasing churn.
  • Obsess about increasing deal size.  Set a goal here.
  • Obsess about increasing revenue per lead.  Get your efficiency up.
  • Obsess about growing qualified leads month-over-month, ideally in excess of your month-over-month MRR goals.
  • Obsess about increasing “net negative churn”, i.e., increasing the total revenue from all your accounts.
  • Obsess about the number of logo accounts you have, until you have so many it doesn’t matter.
  • Obsess about NPS and customer referrals and satisfaction.  Referrals and second order revenue are the cheapest, easiest way to grow.
  • Obsess about your capital efficiency and sales efficiency, until capital doesn’t really matter anymore.  This is more than just your “magic number”.

The thing is though there are no perfect absolute numbers here.  Churn is higher in small businesses than large ones.  Net negative churn is easy-ish in the Enterprise, almost impossible with SMBs.  Seemingly decent sales & marketing efficiency can still burn tons of cash if you grow fast and need a huge support and engineering team.

So measure everything.  Have large annual goals (tied to bonuses) for increasing/decreating the metrics here.  But worry less about what they are at the moment at an absolute level.

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Published on March 2, 2016
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