10 SaaS Metrics You Should Know About

Since its launch in 1985, Microsoft Excel has, well, excelled. In 2011, Office 365 took Excel from disc to cloud, popularising Software as a Service (SaaS). Nowadays, SaaS companies are everywhere — Dropbox, Xero and even we at Tability offer subscription-based services that users can only access online.

The key to success in the SaaS industry lies in prioritising the customer by making the software user-friendly and constantly improving. And what better way to determine success than with metrics?

Metrics provide SaaS companies with the tools they need to progress. On that note, we’ve compiled 10 key metrics in SaaS to give your business a competitive edge.

The 10 most important SaaS metrics examples

Not sure what metrics to measure? Below are 10 examples of SaaS metrics that matter.

1. Monthly Active Users (MAU)
2. Net Promoter Score (NPS)
3. Annual Recurring Revenue (ARR)
4. Churn rate
5. Customer engagement score
6. Customer Lifetime Value (CLV)
7. Customer retention rate
8. Lead-to-customer rate
9. Customer Acquisition Cost (CAC) payback period
10. Viral growth

1. Monthly Active Users (MAU)

Your Monthly Active Users count is a crucial metric that reveals how many people consistently use your software in a month. 

Why it matters

Your MAU reveals how healthy your SaaS customer base is. It shows how well your software is suited to the market and how well your revenue is growing. It’s a better idea to achieve more MAU rather than focus on your number of customers.

2. Net Promoter Score (NPS)

The Net Promoter Score (NPS) measures customer satisfaction through a survey. Users rate their experience with your SaaS company on a scale and explain why they chose that value.

Why it matters

SaaS companies use NPS to measure customer satisfaction. Businesses can track their NPS evolution over time. You'll know your customers are happy if your scores go up. If they go down, rethink your strategy based on the survey’s feedback.

3. Annual Recurring Revenue (ARR)

Put simply, Annual Recurring Revenue (ARR) is how much your company makes per year. It shows your business's revenue based on yearly recurring revenue components such as subscriptions or plans.

Why it matters

ARR enables businesses to increase revenue by providing insight into what customers like — or don’t like — and can inform up/cross-selling strategies. It’s also easier to manage expenses and predict revenue if you know your ARR.

4. Churn rate

Churn is the rate at which SaaS companies lose customers because of account cancellations and non-renewals.

Why it matters

SaaS businesses should analyse churn because retaining a current customer costs less than getting a new one. Keeping a customer can also mean thousands of dollars in revenue in the future. The first step in fixing high churn is understanding your rate and how it has changed over time.

5. Customer engagement score

A customer engagement score uses a unique framework to determine your customers' engagement with your service. Your SaaS methodology can include metrics such as how often a customer is logging in and how long they’re staying logged in.

Why it matters

With a customer engagement score, you can identify trial accounts ready to become paying customers and discover accounts that sales teams could upsell. You can also learn which customers might churn due to low engagement.

6. Customer Lifetime Value (CLV)

In SaaS companies, Customer Lifetime Value (CLV) measures the average amount your customers pay throughout their subscription. It estimates how much each customer is worth.

Why it matters

The biggest benefit of CLV is visibility. By understanding your customer’s spending, you’ll be able to customise your marketing and customer retention efforts. A high CLV can indicate good brand loyalty or product/market fit. 

7. Customer retention rate

SaaS customer retention rate identifies how long, on average, your customers have used your services.

Why it matters

Your customer retention rate shows how well you retain your customers. Keeping existing customers reduces lead generation costs and increases revenue through referrals and up/cross-selling.

8. Lead-to-customer rate

Your lead-to-customer rate shows how many leads turn into paying customers and how well you generate sales-ready leads. It’s often calculated monthly.

Why it matters

The lead-to-customer conversion rate reveals how well your marketing and sales processes convert qualified leads into customers. Understanding this metric is important as it allows you to re-strategise if your SaaS business isn’t generating enough revenue.

9. Customer Acquisition Cost (CAC) payback period

The Customer Acquisition Cost (CAC) payback period measures how long it takes to generate revenue to cover customer acquisition costs.

Why it matters

CAC is a measure of Return on Investment (ROI). It shows you when you’ve broken even on your acquisition efforts. This number should decrease as your business grows, indicating that your sales/lead generation process is working effectively and economically.

10. Viral growth

Viral growth — also known as viral coefficient — is how many new customers a current user generates. Virality primarily happens through word-of-mouth and referrals.

Why it matters

This metric is a good way to monitor your company's growth and the success of its efforts to increase its customer base. High viral growth is an almost certain indicator that your business is growing and generating more revenue.

How to use SaaS key metrics to achieve business goals

Even outside carpentry, the saying 'measure twice, cut once' holds true — before making any irreversible decisions in business, it's important to measure carefully. 

With SaaS KPI metrics, businesses can create goals and write OKRs based on data. Using OKRs — Objectives and Key Results — you can identify, diagnose and solve business problems with the help of your metric findings. How? Define your Objectives (O) using your metrics, and then write Key Results (KRs) that quantify your success. The final step is to hatch a plan to achieve your KRs.

OKRs software like Tability enforces regular check-ins to keep you on track. Get started with a free trial of Tability today!