SaaS Metrics That Matter

The SaaS Metrics You Must Track

SaaS businesses live and die by a set of well-defined metrics. These metrics are not just reporting tools — they are diagnostic instruments that tell you what to fix.

MRR: Monthly Recurring Revenue

MRR is the total predictable revenue your business generates each month from subscriptions. Track: new MRR, expansion MRR, contraction MRR, and churned MRR separately.

ARR (Annual Recurring Revenue) = MRR × 12.

Churn Rate

Percentage of revenue (or customers) lost in a period. Benchmarks:

• Consumer SaaS: < 5% monthly
• SMB SaaS: < 3% monthly
• Enterprise SaaS: < 1% monthly

Net Revenue Retention (NRR)

Measures revenue from existing customers including expansions, contractions, and churn. NRR > 100% means existing customers are growing revenue faster than they churn.

Benchmarks: > 100% = good, > 110% = great, > 120% = exceptional.

CAC: Customer Acquisition Cost

CAC = (sales expense + marketing expense) / new customers acquired.

LTV: Lifetime Value

LTV = ARPU / monthly churn rate.

LTV:CAC Ratio

The most important unit economics metric. Should be 3:1 or better. Below 1:1 means you lose money on every customer.

CAC Payback Period

CAC / ARPU = months to recoup acquisition cost. Under 12 months is good. Under 6 months is excellent.

The Rule of 40

Growth rate + profit margin should equal or exceed 40%.

Key Takeaways

• MRR is the heartbeat of SaaS — track new, expansion, contraction, and churned MRR separately
• NRR > 100% means existing customers are growing revenue — hallmark of a healthy SaaS business
• LTV:CAC ratio should be 3:1 or better — below 1:1 means you're destroying value
• CAC payback under 12 months provides financial sustainability
• Rule of 40: growth rate + profit margin ≥ 40%