13 Essential SaaS Metrics for Data-Fueled Business Success

Think your SaaS business is doing great because revenue is up? Think again. The real story lies in your metrics—data points that reveal whether your growth is sustainable, your customers are happy, and your product is worth sticking around for.

This article covers 13 must-know SaaS metrics to help you understand your business from every angle. Whether you’re tackling churn, improving lifetime value, or scaling revenue, these are the metrics you need to track, analyze, and act on. 

Here's a quick look at how product leaders use metrics to measure success…

MRR is the predictable, steady income your SaaS earns every month from paid subscriptions. It’s also one of the most important in SaaS product metrics. 

MRR = Number of Active Customers × Average Revenue Per Account (ARPA)

If your SaaS business offers multiple subscription tiers, you can refine this by calculating MRR separately for each tier and then summing them up:

MRR = (Number of Customers in Plan A × Price of Plan A) + (Number of Customers in Plan B × Price of Plan B) + …

Let’s break it down with real numbers. Say your SaaS business has:

• 300 customers on a Basic Plan at $30/month.

• 150 customers on a Pro Plan at $50/month.

• 50 customers on a Premium Plan at $100/month.

The MRR calculation would be:
(300 × $30) + (150 × $50) + (50 × $100) = $9,000 + $7,500 + $5,000 = $21,500 MRR

This means you’re generating $21,500 every month in predictable revenue from active subscriptions—good for you!

If MRR is growing, it shows your acquisition strategies and upsell pushes are working. If it’s flat or shrinking, it’s a red flag and time to dig into churn or explore pricing optimizations. 

A cohort analysis can come in handy here to monitor user behavior in set time periods. It will help you evaluate your pricing, onboarding, and other factors that could be affecting a declining MRR. 

🦎 Microsurveys can also help you get contextual feedback on how your cohorts feel about your billing options, and throughout other key chapters on their journey with you.

Industry data from the ProfitWell B2B SaaS Index shows how MRR growth trends shape the SaaS:

• December 2023 marked the first-ever decline in MRR, down 4% from November.

• Annualized MRR growth averaged 11.1% in 2023, far below the 61.8% peak in Q2 2022.

(Source)

For early-stage SaaS businesses, 10-20% monthly MRR growth is an achievable target, while mature companies should aim for consistent, sustainable growth in the range of 6-12% annually.

You’ll get your Annual Recurring Revenue, a.k.a. “run rate”, by multiplying by 12 your Monthly Recurring Revenue. Like MRR, this financial SaaS metric allows you to plan for the future, but this time with a longer-term focus. It’s also a better metric to track if you’re offering yearly contracts and subscriptions. 

ARR = 12 x MRR

For example, if your MRR is $20,000, your ARR would be:

$20,000 × 12 = $240,000 ARR

If your company has an ARR over $10M (woop!), it’s advisable to always look at the recurring revenue annually. But if it’s smaller, try to keep track of expected revenue every month. 

Tracking ARR alongside MRR gives you both the micro (monthly trends) and macro (yearly outlook) view of your business. Together, they ensure you’re prepared for short-term decisions and long-term planning and budgeting.

If you want to improve your company’s ARR here are some recommendations:

• Focus on increasing the quality of your leads and future accounts.

• Offer more attractive yearly payment plans that trump paying monthly.

• Increase your retention rate by reducing product friction.

• Increase your revenue with current customers by offering them upgrades and product upsells.

• Work on an efficient acquisition strategy with the lowest Customer Acquisition Cost (CAC) possible—jump to metric #5 for more on CAC!

ARPA is the average revenue you earn from each customer account over a specific period, usually monthly or annually. 

While similar to ARPU (Average Revenue Per User), ARPA focuses on accounts instead of individual users, making it particularly useful where multiple users may belong to one paying account.

ARPA = Total Monthly Recurring Revenue  / Total # of Paying Accounts

For example, if your SaaS company generates $50,000 in monthly revenue from 200 customer accounts, your ARPA would be:

$50,000 ÷ 200 = $250 per account per month

What does this tell you? 

ARPA gives you a clear view of how much revenue you’re generating from each paying account, helping you:

• Track growth trends: If ARPA increases but the number of accounts remains the same it means customers are upgrading to higher-priced plans or purchasing add-ons.

• Segment accounts: By comparing ARPA across account types, you can identify your most valuable customer account segments.

• Optimize pricing: It shows whether your pricing aligns with the value your accounts receive from your product.

A good ARPA is decided upon depending on your CPA : LTV, and accounting for the revenue markup you want to see per account. 

Your ideal ARPA depends on your business model, pricing strategy, and customer base. Comparing your ARPA to other companies can be misleading, as factors like industry, target market, and pricing structure vary widely.

Customer Lifetime Value (LTV) tells you how much money, on average, a customer brings to your business across the entire time they’re with your business. For SaaS companies, where recurring revenue reigns, knowing your LTV helps you make smart decisions about acquisition spending, price plans, and retention strategies.

For example, if your customer is paying you $100 a month but cancels after six months, that customer’s lifetime value is $600. On the other hand, if they stick around for three years, they’re worth $3,600. 

This concept reveals a lot about how well your business keeps customers happy—and paying.

There are a lot of different formulas for calculating LTV, the most basic form being:

LTV = ARPA / Revenue or Customer churn

Where:

• ARPA = Average Revenue Per Account (monthly or annual)

• Churn Rate = Percentage of accounts or revenue lost each month or year

Example:

• ARPA = $100/month

• Monthly churn rate = 5%

LTV = $100 ÷ 0.05 = $2,000

This formula works, but it’s sensitive to fluctuations in churn—which can be heavily influenced by seasonal buying trends, product bugs causing friction and frustration, or other factors. Small changes in churn can create dramatic swings in your LTV.

Here’s the advanced SaaS LTV calculation we recommend:

LTV = ( ARPA * Gross Margin % ) / Net Revenue Churn Rate

This approach accounts for your profitability (gross margin) and net revenue churn, which includes upsells and expansions that offset lost revenue.

Example:

• ARPA = $100/month

• Gross margin = 80% (profit after subtracting costs like hosting and support)

• Net revenue churn rate = 3%

LTV = ($100 × 0.80) ÷ 0.03 = $80 ÷ 0.03 = $2,667

This formula provides a clearer picture of the actual value a customer brings, accounting for the cost of delivering your service and revenue fluctuations.

It varies by industry, pricing model and customer type. Comparing yourself to others might not be helpful. Instead, track your own benchmarks over time:

• Are customers staying longer after onboarding new features?

• Is churn decreasing with better new user onboarding?

A growing or declining SaaS Lifetime Value brings a more complete picture of the health of the relationships you have with your customers. 

• Build add-on value into your product: Focus both on increasing revenue and retention.

• Expand your product line to attract new customers but also add cross-selling opportunities to current user plans.

• Encourage customers to sign up for a discounted annual subscription instead of a monthly one.

• Master scalable pricing: Offer cheaper and more expensive alternatives depending on the solvency and loyalty of customers (don’t forget to segment and get feedback from your customer base).

Customer Acquisition Cost (CAC) tells you how much it costs to turn a prospect into a paying customer. This includes everything you spend on marketing, ads, sales teams, and tools used to acquire customers.

Calculating customer acquisition cost is essential for early-stage SaaS companies and companies with freemium models because it helps gauge the sustainability of your acquisition process in regard to the profitability of your business. 

The formula is simple:

CAC = Total Expenses to Acquire Customers (over a period) / Total # of Customers Acquired (during that period)

For example, if you spend $50,000 in a month and acquire 100 new customers, your CAC is $50,000 ÷ 100 = $500 per customer.

Balancing your CAC is a subtle exercise. And, this is particularly important when you’re testing and strengthening your business model. 

At first, you’ll need to spend more than your monthly revenue to acquire customers but you’ll have to recover your CAC within the first year if you want your business to stay healthy.

Start by optimizing paid ads—focus on channels that bring high-quality leads at a lower cost. Double down on organic efforts like SEO or referral programs to bring in customers without breaking the bank and are more long-term oriented. 

Improving lead quality and shortening your sales cycle can also help you lower acquisition costs over time. You can do this with blogs, newsletter subscriptions, and good branding—helping onboard a customer before they ever truly step onboard. 

For reference, take a look at the average B2B SaaS CAC by industry and customer size. 

(Source)

The CAC to LTV ratio compares the cost of acquiring a customer (CAC) to the total revenue that customer generates over their lifetime with your product (LTV). It’s the ultimate measure of whether your SaaS business is growing sustainably or burning cash.

A healthy SaaS business typically aims for a 3:1 ratio—meaning every dollar spent on acquiring a customer should bring in three dollars in revenue. 

But, what happens if your ratio is 1:1, 5:1, or even higher? Let’s break it down.

Here’s the formula:

CAC to LTV Ratio = LTV ÷ CAC

This ratio answers one crucial question: For every $1 spent on acquiring a customer, how much revenue does that customer bring in?

Let’s say it’s 1:1 or lower (you’re losing money).

A CAC to LTV ratio of 1:1 means you’re spending as much on acquiring customers as they’re worth to your business. Anything lower than 1:1 is even worse—you’re losing money with every customer you acquire. However, this is often expected in an early-stage startup and is the main reason they go for funding.

How to fix it:

• Lower CAC by optimizing marketing spend and focusing on efficient channels.

• Increase LTV by improving retention, upselling, boosting pricing, or evolving your product for better product market fit (PMF).

3:1 (The ideal zone)

A ratio of 3:1 is considered the sweet spot for SaaS. For every dollar you spend on acquiring a customer, you’re generating $3 in revenue.

Why this works:

• You’re covering costs and earning profit.

• There’s enough room to reinvest in growth (marketing, sales, product development).

5:1 or Higher (Missed growth opportunities)

A ratio of 5:1 or higher might sound great, but it can signal you’re being too cautious with spending on acquisition. You could be leaving revenue on the table by not scaling your marketing and sales efforts.

What it signals:

• You’re not investing enough in growth.

• You may be overly reliant on organic acquisition.

How to fix it:

• Expand into new channels or markets.

• Increase your marketing and sales budget to capture even more customers.

Customer Growth Rate is the percentage increase in your total customer base over a specific period, after accounting for new customers gained and customers lost (churn). It tells you how fast your SaaS business is growing its customer base, and whether your acquisition efforts are keeping pace with churn.

Simply put, it’s a way to measure how well your business is adding and retaining customers over time.

The formula is:

Customer Growth Rate (%) = ((New Customers - Lost Customers) ÷ Starting Customers) × 100

Example:

• Customers at the start of the month: 1,000

• New customers acquired: 150

• Customers lost (churn): 50

Customer Growth Rate = ((150 - 50) ÷ 1,000) × 100 = 10% growth

This means your customer base grew by 10% over the month, factoring in both acquisition and churn.

Customer Growth Rate:

1. Tracks momentum: A healthy growth rate shows your product is gaining traction in the market.

2. Supports revenue growth: More customers often lead to higher Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR).

Highlights retention issues: A low growth rate, despite high acquisition, might indicate churn problems that need attention.

According to ChartMogul’s SaaS Benchmarks Report, top-performing SaaS companies in 2023 grew by 99% annually in the $15M–$30M ARR range, with smaller businesses under $1M ARR experiencing growth as high as 224% annually. 

Translating this into Customer Growth Rate:

• For early-stage companies (ARR under $1M), aim for 10-15% monthly growth

• For mid-sized SaaS companies (ARR $3M–$8M), target 5-8% monthly growth

• For mature companies (ARR above $15M), a healthy range is 2-4% monthly growth

(Source)

Customer Churn Rate a.k.a. Attrition Rate, measures the percentage of customers who leave your product during a specific period.

The lower this number is, the better for your business. For SaaS companies, churn is something to put special attention to, keeping customers is as important as acquiring new ones for your business sustainability. 

Customer Churn Rate = Total # of Customers That Left (in a period) / Total # of Customers (at the beginning of the period)

If you started the quarter with 1,500 customers and lost 120, your churn rate would be:

Churn Rate = (120 ÷ 1,500) × 100 = 8% churn for the quarter.

This signals an issue that needs addressing. You might improve onboarding or implement loyalty incentives to reduce future losses.

In the beginning, replacing a small number of customers is far easier than when a 3% churn turns into thousands of customers. Churn also compounds over time, which means that a 3% monthly churn rate translates into a 31% annual churn rate as your pool of potential customers shrinks.

Besides, keeping your customers engaged is more cost-efficient. It will only cost you one-seventh of what acquiring a new customer costs. The recipe for reducing churn and improving retention has just two words: customer engagement.

According to Recurly, the average churn rate across 1,200+ subscription sites is 3.5% annually—with 2.6% voluntary churn (customers choosing to leave) and 0.8% involuntary churn (issues like failed payments). 

This benchmark indicates that maintaining churn below 3-5% annually is achievable and desirable for most SaaS companies.

(Source)

Revenue Churn Rate shows the percentage of recurring revenue your business loses during a specific period because of cancellations, downgrades, or customer churn.  It’s different from Customer Churn Rate because it focuses on lost revenue rather than the number of customers.

Example:

• If one customer paying $1,000 leaves and another paying $50 leaves, Customer Churn counts both equally.

• Revenue Churn shows the $1,000 loss is far more significant.

This makes Revenue Churn Rate more useful for businesses with tiered pricing or high-ticket products.

Here’s the formula:

Revenue Churn Rate (%) = (MRR Lost to Churn ÷ Total MRR at the Start of the Period) × 100

Example:

• MRR (Monthly Recurring Revenue) at the start of the month: $100,000

• MRR lost due to churn: $5,000

Revenue Churn Rate = ($5,000 ÷ $100,000) × 100 = 5%. This means your business lost 5% of its recurring revenue during the month.

According to a Baremetrics report, revenue churn rates vary significantly based on a company’s average revenue per user (ARPU):

• Companies with an ARPU of $10 or less experience an average revenue churn rate of 6.2%.

• For companies with an ARPU of $100-$250, the average revenue churn rate rises slightly to 7.1%.

The highest churn occurs for companies with an ARPU of $25-$50, where the average revenue churn rate peaks at 8.7%.

💡Want Expert tips on curbing product churn. Watch the 60-minute webinar with a Q&A 👇

More on churn—yep, there are a lot of ways to calculate it. Net MRR Churn Rate measures the percentage of your MRR lost after factoring in expansion revenue from upgrades, upsells, and cross-sells. 

Unlike regular churn metrics, Net MRR Churn accounts for both revenue losses and revenue growth from existing customers, making it a more comprehensive indicator of your recurring revenue’s health.

Here’s the formula:

Net MRR Churn Rate (%) = [(MRR Lost + MRR Downgrades - MRR Expansion) ÷ Total MRR at Start of Period] × 100.

Let’s say your business starts the month with $200,000 in MRR:

• You gain $10,000 through upsells

• You lose $3,000 from downgrades

• You lose $8,000 from cancellations

Net MRR Churn Rate = [($8,000 + $3,000 - $10,000) ÷ $200,000] × 100 = 0.5% churn

This small positive churn shows you’re close to breaking even but could aim for negative churn by increasing expansion revenue.

According to ChartMogul, best-in-class SaaS companies achieve a Net Revenue Retention (NRR) of 115-125% when selling to mid-market and enterprise customers. 

A high NRR indicates that your existing customers are driving growth, even without acquiring new ones.

A negative Net MRR Churn Rate is ideal. This means that upsells and cross-sells not only cover churn but generate additional revenue.

(Source)

This metric has a product-led growth model, in which the improved user experience is the main force behind business growth. You can obtain Activation Rate with a straightforward calculation, as long as you know the “aha! moment” for your product or customer segment:

Activation Rate (%) = (Users Who Complete the Activation Event ÷ Total New Users) × 100

An activation event is the first meaningful action users take that demonstrates they’ve experienced the value of your product. It varies depending on your product type. For example:

• For email marketing software, it might be sending the first campaign.

• For a project management tool, it could be creating a project.

• For a video editing app, it might be exporting a first video.

Your activation event should align with the moment when users mutter, "Aha, this solves my problem!"

Let’s say you run a design platform:

• Total new users this month: 5,000

• Users who exported their first design (activation event): 3,500

Activation Rate = (3,500 ÷ 5,000) × 100 = 70%

If you notice the remaining 30% drop off before exporting their first design, you could focus on simplifying the design creation process or offering a step-by-step in-app tutorial to improve the rate.

According to Userpilot’s Product Metrics Benchmark Report 2024, activation rates vary by product complexity:

• Simple SaaS tools (e.g., task management) often see activation rates above 80%.

Complex products (e.g., enterprise SaaS or analytics platforms) tend to have lower rates around 40-60%.

(Source)

Here are a few ideas on how you can boost your activation rate:

• Carefully design user journey maps.

• Get user feedback through microsurveys.

• Analyze behavioral analytics and cohorts.

• Optimize your user onboarding to shorten the time it takes for new users to activate. 

Net Promoter Score is a way to directly measure your customers’ perception of how satisfied they are with your product. In other words, NPS is a tool to collect qualitative customer feedback to find the strengths and weak points of your product, but also to find the right target fit. 

To calculate NPS you can survey your customers with a question like:

• “How likely are you to recommend us to a friend or colleague?” 

They can answer on a scale from 1 to 10, with 1 being the least likely and 10 the most. 

• If they answer from 1 to 6, they’re called a Detractor. 

• If they select 7 or 8, they’re neutral. 

• If you get 9 or 10, you’ve just found a key promoter of your product! 

The calculation goes like this:

NPS =  (# Promoters - # Detractors) / Total # of Surveyed Customers * 100

From this calculation, you’ll know which customers are so happy with your product that they can be potential case studies for your business. Or can predict which of them are likelyto churn—that’s the time for you to work on a churn-fighting strategy to get their positive attention once again.

If your SaaS company surveys 500 customers and receives the following responses:

• 200 Promoters (40%)

• 150 Passives (not included in the calculation)

• 150 Detractors (30%)

NPS = 40% - 30% = +10

This low score signals dissatisfaction. To improve, you might focus on onboarding, customer support, or product enhancements based on feedback from detractors.

An NPS of 40 or higher is considered average, based on Retently’s benchmarks. However, top-performing SaaS companies strive for NPS scores closer to 60, which aligns more with high customer loyalty seen in industries like Digital Marketing Agencies (59).

(Source)

Gross Margin measures how much of your revenue is left after covering the costs of delivering your product (known as the Cost of Goods Sold or COGS). 

In SaaS, COGS often includes expenses like hosting, customer support, and third-party tools. This metric shows how efficiently you’re running your business and how much money is available to reinvest in growth.

Gross Margin (%) = [(Total Revenue - COGS) ÷ Total Revenue] × 100

Example:

• Total Revenue: $1,000,000

• COGS: $210,000

Gross Margin = [($1,000,000 - $210,000) ÷ $1,000,000] × 100 = 79% Gross Margin

This means 79% of your revenue is left after covering the costs of delivering your product.

According to the Benchmarkit, the median Gross Margin for software subscriptions was 79%, unchanged from 2022.

• Top Quartile Companies: Achieved margins starting at 85%, driven by:

  • Better cloud cost management to reduce hosting expenses

  • Automation in customer support to lower costs

• Impact of professional services: Gross Margins for companies offering professional services (like onboarding or training) tend to be lower, often in the 20-35% range.

(Source)

We’ve covered 13 essential SaaS metrics, but how do you use them? Here’s a simple checklist to help you measure metrics effectively and stay on track:

• Your LTV should be at least 3x your CAC. A profitable SaaS business should earn three times more from each customer than it costs to acquire them. If your ratio is lower, it’s a sign to refine your acquisition or retention strategies.

• Recover your CAC within one year. On average, successful SaaS companies recover their CAC in 5-7 months. If it’s taking longer than a year, you’re burning too much capital and limiting your ability to scale.

• Generate at least 30% of your revenue from expansions. Loyal customers should account for a good chunk of your growth. Aim for 30% of your revenue to come from upsells, cross-sells, or account upgrades. It’s a sign of strong customer relationships.

• Focus on metrics that match your business stage. Not every metric deserves your attention all the time. Early-stage businesses should prioritize CAC and activation. Growth-stage businesses should focus on churn and NRR. Mature companies? It’s all about LTV and gross margin.

• Use benchmarks for context but track your own trends. Industry averages are helpful, but your internal growth is what really matters. Regularly compare your metrics against your past performance to spot improvements.

• Automate data tracking to save time and improve accuracy. Tools like ChartMogul or ProfitWell help you collect, track, and report metrics without manual errors. They also make life easier by centralizing your data.

• Monitor metrics regularly but avoid overanalyzing. Review metrics monthly or quarterly to make informed decisions. Obsessing over daily data will just distract you from long-term goals.

• Look at the bigger picture. Metrics are interconnected. For example, a high CAC might be okay if your LTV is growing or expansion revenue offsets losses. Always evaluate metrics in context rather than in isolation.

To wrap up, here’s a list of SaaS analytics tools to help track your metrics easily. 

Start by outlining your goals for SaaS performance, then choose the right metrics that align with these goals. Set up workflows to interpret all the data meaningfully and draw insights to make necessary modifications to your product and go-to-market strategies. 

Now, it's over to you: start tracking product performance today and boost your product's growth! Good luck!