By 2024, the Software as a Service (SaaS) market is expected to grow to about $247 billion, according to Statista. As the market expands, key metrics become increasingly vital for SaaS companies to measure performance, growth, and customer engagement. These metrics provide actionable insights into various aspects of SaaS business.
What is SaaS?
Software as a Service (SaaS) is one of the main categories of cloud computing. SaaS is a software distribution model where a cloud provider hosts applications and makes them available to end users over the internet.
What is SaaS Metrics?
SaaS metrics are benchmarks companies use to measure growth and performance. SaaS metrics help businesses optimize their strategies to boost growth, profitability, and customer satisfaction.
What are Key Metrics for SaaS Companies?
There are 5 important SaaS metrics:
- Customer Acquisition Cost (CAC)
- Customer Lifetime Value (CLV)
- Churn Rate
- Recurring Revenue
- Active Users
Customer Acquisition Cost (CAC)
Customer acquisition cost (CAC) shows how much it costs to acquire a new customer. CAC is the total cost of marketing, sales, and other activities needed to bring a new customer on board. CAC is one of the key metrics for SaaS companies to help evaluate their strategies: If CAC is low, your business can scale rapidly.
How to calculate CAC:
Here is a basic formula to calculate CAC:
Customer Acquisition Cost (CAC) = Total acquisition costs / Total customers acquired
Total acquisition costs:
- Marketing expenses (advertising, social media campaigns, etc)
- Sales expenses (salaries, commissions, sales tools, etc)
- Others (onboarding expenses, etc)
Total customers acquired: The number of new customers acquired during the same period.
Example: A company spends $10,000 on marketing and sales within one month and acquires 100 new customers during this period.
CAC = $10,000 / 100 = $100 → The company spends $100 to get a new customer.
Customer Lifetime Value (CLV)
Customer lifetime value (CLV), or LTV, is the average amount of money a company expects to earn from a customer during their entire engagement with the company. CLV shows the importance of customer retention: Higher CLV indicates retaining customers is more valuable than acquiring new ones.
How to calculate CLV:
One of the most simple formulas to measure CLV is:
CLV = Average Revenue Per Customer x Average Customer Lifetime
Example: A customer spends an average of $100 monthly on your SaaS product over their entire three-month relationship with your business, your CLV would be $100 x 3 = $300
Churn Rate
Churn rate, or customer churn rate, is the rate at which customers leave or cancel a subscription or service within a certain period. It measures how many customers you’ve lost. A high churn rate shows your business has issues like customer satisfaction, product quality, or service delivery. When you reduce the churn rate, you can improve customer retention.
How to calculate churn rate:
Churn Rate = (Number of customers lost during certain period / Number of customers at the start of certain period) × 100
Example: A monthly subscription-based SaaS company starts the month with 1,000 customers and gets 50 customers who have canceled their subscriptions during that month.
Churn rate = (50 / 1,000) × 100 = 5% → The churn rate is 5%, showing that 5% of the customer base is left during the month.
Recurring Revenue
There are two typical recurring revenue metrics: Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR).
Monthly Recurring Revenue (MRR)
MRR is the revenue a company will earn each month. MRR is one of the most important metrics, especially for companies that use a subscription-based business model. MRR provides a consistent view of monthly revenue and tracks growth trends, helping businesses assess financial stability and predict future revenue.
How to calculate MRR:
MRR = Σ (Monthly revenue from each customer)
Example: If you have 100 customers paying an average of $50 per month, your MRR would be: 100 x $50 = $5,000.
Note: MRR can be influenced by recurring revenue from new customers; from add-ons and upgrades; and revenue lost from cancellations and downgrades that month.
Annual Recurring Revenue (ARR)
While MRR is the revenue you generate each month, ARR is the revenue you will generate over a year. ARR provides a comprehensive view of the total recurring revenue expected over the year. A stable or growing ARR reflects financial health.
How to calculate ARR:
ARR = Σ (Annual revenue from each customer)
Or: ARR = MRR x 12
Note: ARR can be influenced by recurring revenue from new customers; from add-ons and upgrades; and revenue lost from cancellations and downgrades that year.
Active Users
Active users engage with a product or service within a given period. This SaaS metric can be analyzed in ways like Daily Active Users (DAU), Weekly Active Users (WAU), and Monthly Active Users (MAU). This includes users who log in, perform other actions, or generate revenue.
- Daily Active Users (DAU): The number of unique users who engage with the product or service daily.
- Weekly Active Users (WAU): The number of unique users who engage weekly.
- Monthly Active Users (MAU): The number of unique users who engage monthly.
Active users show the level of engagement with a product or service. Higher numbers of active users often indicate better engagement and product adoption. Active users are key to understanding customer retention rates and growth trends.
List of SaaS Metrics for Your Business
Here is a full list of SaaS indicators:
| SaaS metrics | Meaning |
| Customer Acquisition Cost (CAC) | How much it costs to acquire a new customer |
| Customer Lifetime Value (CLV) | The average amount of money a company expects to earn from a customer during their entire engagement with the company. |
| Churn Rate | The rate at which customers leave or cancel a subscription or service within a certain period. |
| Monthly Recurring Revenue (MRR) | The revenue generated each month. |
| Annual Recurring Revenue (ARR) | Additional revenue is generated from existing customers through upsells, cross-sells, or increased usage. |
| Daily Active Users (DAU) | The number of unique users who engage with the product or service daily. |
| Weekly Active Users (WAU) | The number of unique users who engage weekly. |
| Monthly Active Users (MAU) | The number of unique users who engage monthly. |
| Average Revenue Per User (ARPU) | The average revenue generated by each user/customer over a given period. |
| Net Revenue Retention (NRR) | Revenue growth or loss from existing customers, accounting for upgrades, downgrades, and churn. |
| Gross Margin | Revenue remaining after subtracting the cost of goods sold (COGS). |
| CAC Payback Period | The time it takes to recover the cost of acquiring a customer. |
| Expansion Revenue | The percentage of users completing a predefined key action signifies they are successfully onboarded and engaged with the product. |
| Customer Retention Rate (CRR) | The rate at which customers continue to use the product/service over a given period. |
| Customer Satisfaction Score (CSAT) | A measure of customer satisfaction with a product or service. |
| Net Promoter Score (NPS) | The level of customer loyalty and the likelihood of customers recommending the product or service to others. |
| Average Contract Value (ACV) | The average annual revenue generated from a customer contract. |
| Activation Rate | The percentage of users who complete a predefined key action that signifies they are successfully onboarded and engaged with the product. |
| Feature Adoption Rate | The percentage of users who use a specific feature of the product. |
| Time to Value (TTV) | The time it takes for a customer to realize the value of a product or service. |
SaaS Metrics by Specific Functions
In the SaaS industry, each part of your business— marketing, sales, or customer onboarding—has its own important metrics. Tracking these indicators helps you fine-tune your strategies, boost efficiency, and better serve your customers.
Below are the essential SaaS metrics for specific areas in your SaaS companies: marketing, sales, customer onboarding, finance, product management, and customer success.
SaaS Marketing Metrics
Customer Acquisition Cost (CAC)
CAC shows how much it costs to acquire a new customer. CAC is the total cost of marketing, sales, and other activities needed to bring a new customer on board.
Churn Rate
Churn rate, or customer churn rate, is the rate at which customers leave or cancel a subscription/service within a given period. When you reduce the churn rate, you can improve customer retention.
Customer Lifetime Value (CLV)
CLV is the average amount of money a company expects to earn from a customer during their entire engagement with the company.
Activation Rate
Activation Rate is he percentage of users who complete a predefined key action that signifies they are successfully onboarded and engaged with the product.
Net Promoter Score (NPS)
NPS is the level of customer loyalty and the likelihood of customers recommending the product or service to others.
Conversion Rate
The percentage of visitors to your website or landing page who take a desired action like signing up for a free trial or making a purchase. This metric indicates whether your marketing efforts are worth it or not.
Click-Through Rate (CTR)
CTR is the percentage of people who click on a link, ad, or call-to-action relative to the number of people who view it. CTR is an important metric to measure how compelling your marketing messages and ads are.
SaaS Sales Metrics
Recurring Revenue
While Monthly Recurring Revenue (MRR) is the revenue you generate each month, Annual Recurring Revenue (ARR) is the revenue you will generate over a year.
Sales Cycle Length
Sales cycle length is the time between the first interaction with a potential customer and the closing of the deal.
Customer Churn Rate
Customer churn rate is the rate at which customers leave or cancel a subscription or service within a certain period.
Customer Retention Rate (CRR)
CRR is the rate at which customers continue to use the product or service over a given period.
Average Revenue Per User (ARPU)
The average revenue generated by each user over a given period.
Customer Onboarding Metrics
Time to First Value
The time it takes for a customer to realize the value of a product or service.
Churn Rate
The rate at which customers leave or cancel a subscription or service over a certain period.
Onboarding Completion Rate
Onboarding completion rate is the percentage of new users who complete the entire onboarding process. This process typically includes initial setup, training, and any introductory tasks.
Customer Satisfaction Score (CSAT)
A measure of customer satisfaction with a product or service.
Feature Adoption Rate
The percentage of users who use a specific feature of the product.
SaaS Financial Metrics
Monthly Recurring Revenue (MRR)
MRR is the revenue a company will generate each month.
Customer Lifetime Value (CLV)
The average amount of money a company expects to earn from a customer during their entire engagement with the company.
Customer Acquisition Cost (CAC)
CAC shows how much it costs to acquire a new customer. CAC is the total cost of marketing, sales, and other activities needed to bring a new customer on board.
Churn Rate
The rate at which customers leave or cancel a subscription or service within a certain period.
Burn Rate
Burn rate measures the speed at which a company is spending its cash reserves before reaching profitability.
Gross Margin
Gross margin is revenue remaining after subtracting the cost of goods sold (COGS).
Net Income
Net income is sales minus the cost of goods sold, general expenses, taxes, and interest. Net income is a key metric of overall financial health and profitability.
SaaS Product Management Metrics
Product Adoption Rate
Product adoption rate is the percentage of users who have adopted your product.
Feature Usage
Feature usage tracks how often and in what ways users interact with a specific feature of a SaaS product. It reflects which features are popular and which are underutilized.
Customer Satisfaction Score (CSAT)
CSAT is a measure of customer satisfaction with a product or service.
Net Promoter Score (NPS)
NPS is the level of customer loyalty and the likelihood of customers recommending the product or service to others.
Churn Rate
The rate at which customers leave or cancel a subscription or service within a certain period.
Time to Value (TTV)
The time it takes for a customer to see the value of a product/service.
Active Users
Individuals who engage with a product or service within a given period.
Customer Retention Rate (CRR)
CRR is the rate at which customers continue to use the product or service over a given period.
Customer Success Metrics
Customer Retention Rate (CRR)
The rate at which customers continue to use the product or service over a given period.
Net Promoter Score (NPS)
The level of customer loyalty and the likelihood of customers recommending the product or service to others.
Customer Satisfaction Score (CSAT)
A measure of customer satisfaction with a product or service.
Customer Lifetime Value (CLV)
The average amount of money a company expects to generate from a customer during their entire engagement with the company.
Customer Churn Rate
Customer churn rate is the rate at which customers leave or cancel a subscription or service within a certain period.
Customer Health Score
Customer health score measures customer engagement, satisfaction, and product usage to predict whether customers are likely to renew, upgrade, or churn.
Conclusion
Key metrics for SaaS companies are essential for driving sustained growth and long-term success. Monitoring these metrics helps businesses make informed decisions and enhance their strategies.
Frequently Asked Questions (FAQs) about SaaS Metrics
What are the key SaaS metrics to track?
The most important SaaS metrics include Customer Acquisition Cost (CAC), Customer Lifetime Value (CLV), Churn Rate, Recurring Revenue, and Active Users.
How is Customer Acquisition Cost (CAC) calculated in SaaS?
CAC is calculated by dividing total acquisition costs (marketing, sales, etc.) by the number of new customers acquired in a given period. A lower CAC means your acquisition is cost-effective.
What is a good churn rate for SaaS?
A churn rate under 5% monthly is generally acceptable. For enterprise SaaS, a churn rate of 1-2% annually is ideal.
What is Monthly Recurring Revenue (MRR)?
MRR is the total predictable revenue generated from customers every month. It’s critical for tracking revenue growth and financial forecasting.
How do you calculate Customer Lifetime Value (CLV) in SaaS?
CLV is calculated by multiplying the average revenue per customer by the customer’s average lifespan. It indicates a customer’s long-term value.
What is Net Revenue Retention (NRR) in SaaS?
NRR measures revenue growth or loss from existing customers, accounting for upgrades and churn. A high NRR (over 100%) shows strong customer retention and upselling.
What’s the difference between MRR and ARR?
MRR (Monthly Recurring Revenue) tracks monthly revenue, while ARR (Annual Recurring Revenue) projects yearly revenue. Both are vital for financial planning.
Why is churn rate important in SaaS?
The churn rate shows how many customers stop using your service. A high churn rate hurts growth, so reducing churn improves retention and revenue.
How can SaaS companies lower Customer Acquisition Cost (CAC)?
Lower CAC by focusing on inbound marketing, improving SEO, leveraging referral programs, and optimizing lead nurturing efforts.
Why are active users important in SaaS?
Active users (DAU, WAU, MAU) indicate product engagement. Higher active users lead to better customer retention and long-term growth.
