Dear SaaStr: What SaaS Metric is Most Important of All?
Beyond MRR growth + managing the burn rate — which ultimately are really are all that matters … you should obsess over improving every key metric and KPI. You can’t change everything overnight. But you can improve almost everything in one quarter, if it’s a top priority.
Maybe your NPS isn’t that high. Maybe your NRR isn’t quite top-tier yet. Or churn is too high. Or upsells aren’t clicking yet,
So be it, for the moment. First, just establish your baseline, for better or worse, in each key metric. Then once you’ve measured them, set goals of improving each at least 20% (or whatever amount) annually, with interim quarterly goals to get you there:
- Obsess about decreasing churn. If you do, it comes down.
- Obsess about increasing deal size. Set a real goal here and track it monthly.
- 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”.
Now, you may say that’s obvious, and perhaps it is. But obsession is just Step 1.
And key to obsessing about a key metric is Step 2: making it a core company goal, sharing it with everyone, and having a single owner in senior management. An owner that reports against it every week and every month and at every board meeting.
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, much harder 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 first, measure everything. Have large annual goals (tied to bonuses) for increasing/decreasing the metrics here. But worry less about what they are at the moment at an absolute level. Instead, decide the top 3-5 metrics for the whole company to obsess on. Make sure everyone knows the goals. And tracks them every single time you meet.
Do that, and magic happens.
(note: an updated SaaStr Classic answer)