Software as a Service (SaaS) metrics are the standard measurements used by SaaS companies to evaluate their performance and health. These metrics provide insights into a company’s growth, profitability, customer acquisition and retention, and overall efficiency. Here are some of the most common SaaS metrics:
- Monthly Recurring Revenue (MRR): The total predictable revenue that a company expects to receive every month from its active subscribers.
- Annual Recurring Revenue (ARR): Similar to MRR but calculated on an annual basis.
- Customer Lifetime Value (CLTV or LTV): The total amount of money a customer is expected to spend on your services during their lifetime as a customer.
- Customer Acquisition Cost (CAC): The average cost of acquiring a new customer, including marketing and sales expenses.
- Churn Rate: The percentage of customers who cancel or do not renew their subscriptions within a certain time period.
- Gross Margin: The difference between revenue and COGS (Cost of Goods Sold), which is typically expressed as a percentage of revenue.
- Average Revenue Per User (ARPU): The average revenue received from each user or account per time period.
- Quick Ratio: A measure of a company’s ability to grow its recurring revenue despite churn. It’s calculated by dividing the new MRR plus expansion MRR by the churned MRR.
- Lead Conversion Rate: The percentage of leads that become paying customers.
- Expansion Revenue: Additional revenue generated from existing customers through upsells, cross-sells, and add-ons.
- Net Promoter Score (NPS): A metric that measures customer satisfaction and loyalty by asking how likely customers are to recommend your product or service to others.
- Payback Period: The amount of time it takes for a company to recoup its CAC.
- Customer Retention Cost (CRC): The total cost of retaining existing customers, including support, success, and account management costs.
- Monthly Active Users (MAU)/Daily Active Users (DAU): The number of unique users who engage with the app or platform over a month or a day, respectively.
- Burn Rate: The rate at which a company is spending its capital before reaching profitability.
These metrics are vital for SaaS companies because the business model relies on subscription-based revenue streams, which require a keen understanding of customer behavior, cost management, and revenue growth over time. Understanding and analyzing these metrics allows SaaS companies to make informed decisions about pricing, marketing, product development, and customer service strategies.