In a SaaS business, metrics are not optional. They tell you whether your business is healthy, growing, and sustainable — or burning cash while looking busy. Here are the KPIs every SaaS founder should track from day one.
Revenue metrics
MRR (Monthly Recurring Revenue): the lifeblood of any SaaS business. Calculate it by multiplying the number of paying customers by the average revenue per customer. Track new MRR, expansion MRR (upsells), churned MRR, and net new MRR.
ARR (Annual Run Rate): MRR × 12. Used for annual planning and valuation discussions.
NRR (Net Revenue Retention): (Starting MRR + Expansion MRR — Churned MRR) / Starting MRR. An NRR above 100% means your existing customers are growing faster than you're losing them. The best SaaS companies have NRR above 120%.
Growth metrics
MoM Growth Rate: the percentage increase in MRR month over month. For early-stage startups, 15-20% monthly growth is excellent. After $1M ARR, 5-10% is strong.
CAC (Customer Acquisition Cost): total sales and marketing spend divided by the number of new customers acquired. If you spent $10,000 and acquired 20 customers, your CAC is $500.
Payback Period: CAC divided by MRR per customer. If it costs $500 to acquire a customer paying $50/month, the payback period is 10 months. Investors typically want to see payback under 12 months.
Retention metrics
Churn Rate: the percentage of customers who cancel each month. Monthly churn above 5% is a red flag. Best-in-class SaaS companies keep monthly churn under 2%.
Logo Churn vs Revenue Churn: logo churn counts customers lost; revenue churn accounts for the revenue lost. If you lose small customers but retain large ones, revenue churn might be acceptable even if logo churn is high.
Retention Cohort Analysis: track how different customer cohorts behave over time. A cohort that joined in January might have different retention than one from June. This reveals whether your product is improving or declining.
Engagement metrics
DAU/MAU Ratio: daily active users divided by monthly active users. A ratio above 0.2 means users are engaging multiple times per week. Above 0.5 means daily usage.
Time to Value (TTV): how long from sign-up to the customer experiencing their first "aha moment." Shorter is always better. Slack famously optimized TTV to minutes.
Feature Adoption Rate: percentage of users who use a specific feature. Low adoption on a core feature signals a UX or onboarding problem.
Financial efficiency metrics
Gross Margin: (Revenue — COGS) / Revenue. For SaaS, gross margin should be above 70%. Below 60% and your unit economics are concerning.
Burn Multiple: Net cash burned divided by net new ARR. A burn multiple of 1x means you burn $1 for every $1 of new ARR. Below 2x is generally healthy for growth-stage companies.
LTV (Customer Lifetime Value): average revenue per customer × average customer lifespan. A healthy LTV:CAC ratio is 3:1 or higher.
You don't need to track all of these from day one. Start with MRR, churn, and CAC. Add more metrics as your business matures. The goal is not data for data's sake — it's actionable insights that guide decisions.
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