The 12 SaaS Metrics Every Founder Must Understand (And How to Track Them)

SaaS Metrics That Matter

Understanding your metrics is the difference between guessing and knowing. Here are the 12 metrics every SaaS founder must master.

1. Monthly Recurring Revenue (MRR)

**What**: Predictable monthly revenue from subscriptions

**Formula**: Sum of all monthly subscription values

**Benchmark**: Growth rate of 10-20% month-over-month for early stage

2. Annual Recurring Revenue (ARR)

**What**: MRR × 12

**Why It Matters**: Standard measure for SaaS valuation

3. Churn Rate

**What**: Percentage of customers who cancel

**Formula**: (Customers lost / Starting customers) × 100

**Benchmark**: <3% monthly for SMB, <1% monthly for enterprise

4. Customer Lifetime Value (LTV)

**What**: Total revenue expected from a customer

**Formula**: ARPU × Gross Margin / Churn Rate

**Why It Matters**: Determines how much you can spend to acquire

5. Customer Acquisition Cost (CAC)

**What**: Cost to acquire one customer

**Formula**: Sales & Marketing Spend / New Customers

**Benchmark**: LTV should be 3x+ CAC

6. LTV:CAC Ratio

**What**: Value created per dollar spent on acquisition

**Benchmark**: 3:1 or higher is healthy

7. Payback Period

**What**: Months to recover CAC

**Formula**: CAC / (ARPU × Gross Margin)

**Benchmark**: <12 months for SMB, <18 months for enterprise

8. Net Revenue Retention (NRR)

**What**: Revenue from existing customers including expansion/churn

**Formula**: (Starting MRR + Expansion - Churn) / Starting MRR

**Benchmark**: >100% means you grow even without new customers

9. Gross Margin

**What**: Revenue minus cost of goods sold

**Formula**: (Revenue - COGS) / Revenue × 100

**Benchmark**: 70-80%+ for software

10. Monthly Active Users (MAU)

**What**: Unique users active in 30 days

**Why It Matters**: Leading indicator of engagement and churn

11. Activation Rate

**What**: % of signups who complete key action

**Why It Matters**: Indicates product value clarity

12. Viral Coefficient

**What**: New users generated per existing user

**Formula**: (Invitations × Conversion Rate)

**Benchmark**: >1 means viral growth

How to Track These Metrics

**Tools**:

Using Metrics for Decisions

**If churn is high**: Focus on onboarding and product value

**If CAC is high**: Optimise marketing channels

**If LTV is low**: Increase pricing or reduce churn

**If activation is low**: Improve onboarding flow

Metrics tell you where to focus. Track them religiously, review weekly, and act on what they reveal.