V
Vivek Kumar
Author
September 18, 202310 min read
Business
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SaaS businesses live and die by metrics. But with so many to track, which ones actually matter? As CEO of Softechinfra, I've helped SaaS founders build analytics-driven products. Here's a practical guide to the metrics that drive success.
3:1
Target LTV:CAC Ratio
120%+
Best-in-Class NRR
70-80%
Healthy Gross Margin
<5%
Annual Churn Target
Revenue Metrics
Monthly Recurring Revenue (MRR)
The foundation metric for any SaaS business:
- Predictable monthly revenue
- Excludes one-time charges
- Track new, expansion, churn, and reactivation
Net Revenue Retention (NRR)
✅ Key Insight: NRR >100% means growth without new customers. Best-in-class companies achieve 120%+. This was a core metric we tracked when building Radiant Finance.
Average Revenue Per User (ARPU)
Your pricing health check:
- Total revenue / customers
- Track trends over time
- Segment by cohort or plan
Customer Metrics
CAC
Customer Acquisition Cost - all sales & marketing spend / new customers
LTV
Lifetime Value - ARPU × customer lifetime or ARPU / churn rate
Churn Rate
Customers lost / total customers (track monthly and annually)
NPS
Net Promoter Score - B2B SaaS benchmark is 30-40
LTV:CAC Ratio
💡 Rule of Thumb: LTV:CAC ratio should be at least 3:1 for a healthy SaaS business. Below 3:1 indicates acquisition costs are too high relative to customer value.
Growth Metrics
Month-over-Month Growth
Velocity indicator:
- Formula: (Current - Previous) / Previous
- Healthy early-stage: 10-20%
- Scales down as you grow
Payback Period
Time to recover CAC:
- CAC / (ARPU × Gross margin)
- Healthy: 12-18 months
- Affects cash flow planning
"The metrics that matter most depend on your stage. Early-stage, focus on activation and engagement. Growth-stage, focus on CAC and LTV. Scale-stage, focus on efficiency and NRR."
Operational Metrics
Gross Margin
Profitability foundation:
- (Revenue - COGS) / Revenue
- SaaS benchmark: 70-80%
- Include hosting, support costs
Burn Rate and Runway
Financial health indicators:
- Monthly cash burn
- Cash / Burn = Months of runway
- Plan 18+ months ahead
Tracking Best Practices
Build a Dashboard
Essential views:
- Executive summary
- Revenue breakdown (new, expansion, churn, reactivation)
- Cohort analysis
- Funnel metrics
Review Cadence
W
Weekly
Key operational metrics and pipeline
M
Monthly
Full dashboard review and MRR analysis
Q
Quarterly
Deep analysis, planning, and strategy
For more on building successful SaaS products, read our Product-Market Fit Guide.
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Tags:
SaaSMetricsBusiness AnalyticsStartupsGrowth