SaaS Metrics That Actually Matter
SaaS companies can track hundreds of metrics. Most don't matter. Some actively mislead. Here are the metrics that actually tell you if your business is healthy.
The Core Four
The foundation. How much predictable revenue you generate each month. Include only recurring charges—exclude one-time fees, professional services, and usage overages unless they're genuinely predictable.
Track MRR changes by component: new business, expansion, contraction, and churn. The breakdown tells you where growth is coming from and where it's leaking.
How much revenue you keep and grow from existing customers, excluding new sales. An NRR above 100% means you're growing even without new customers.
Top SaaS companies hit 120%+ NRR. Below 90% indicates serious product or customer success problems. This is the single best indicator of product-market fit in SaaS.
How much you spend to acquire a customer. Include all sales and marketing costs—salaries, tools, advertising, events.
CAC alone means nothing. You need to compare it to customer value. Which leads to...
How many months until a customer's gross profit covers their acquisition cost.
Under 12 months is healthy. Under 6 months is excellent. Above 18 months is a problem—you're investing too much upfront relative to returns.
The Warning Signs
Logo churn vs revenue churn: Losing 10 small customers differs from losing 1 large customer, even if the revenue is equal. Track both. High logo churn might indicate product problems. High revenue churn concentrated in large accounts might indicate enterprise fit issues.
Gross margin: SaaS businesses should target 70%+ gross margins. If yours is lower, you may have infrastructure inefficiencies, too much included support, or pricing problems.
Quick ratio: New MRR plus expansion divided by contraction plus churn. Above 4 is excellent growth efficiency. Below 1 means you're shrinking.
Metrics That Mislead
Registered users: Means nothing without activation. A million accounts with 10% activation is worse than 100,000 accounts with 50% activation.
Total customers: Without segmentation, this hides important information. Are you adding lots of small customers while losing large ones? The total might be flat while the business is declining.
Gross MRR growth: Focusing on new revenue without subtracting churn creates false optimism. Net growth is what matters.
How Often to Review
MRR components: weekly. You should know if you're on pace before the month ends.
NRR and churn: monthly. Review cohort patterns quarterly.
CAC and payback: monthly calculation, quarterly trend analysis. These are noisy month to month.
All core metrics: board-level review quarterly with trends and commentary.