20 Metrics & KPIs Every SaaS Company Should Track

Over the years, the SaaS model has emerged as one of the most virtuous. If a SaaS product is good, its popularity can quickly skyrocket.

However, we all agree that this is not enough to achieve success. Success is not measured solely through the lens of sales and popularity.

KPIs are essential in this quest for success. However, it is necessary to identify those that are most relevant to one's business and use them wisely. So what are the SaaS KPIs to follow to better manage one's business?

Key SaaS metrics

5 SaaS Revenue-Related KPIs

Isn't it said that money is the lifeblood of business? The KPIs below will provide you with essential information about your cash flow. Beyond the numerical data, they provide insights into the frequency and predictability of revenue and are essential for accurately assessing the financial health and growth of your business.

1. MRR

Monthly Recurring Revenue (MRR) is a KPI that informs businesses about the growth of their activities. Specifically, it refers to the total recurring revenue generated each month from paid subscriptions. How to calculate it? To obtain it, simply apply the following formula:

MRR = Average subscription amount x Number of monthly subscribers

Let's say you offer recruitment software and record the following:

• 112 clients subscribed to offer 1 at £50/month
• 63 clients subscribed to offer 2 at £80/month

Your MRR calculation would be:

MRR = (Number of clients subscribed to offer 1 x Price of offer 1) + (Number of clients subscribed to offer 2 x Price of offer 2). Thus, we would have:

(112 x £50/month) + (63 x £80/month) = £5,600/month + £5,040/month, resulting in a total MRR of £10,640 per month.

2. ARR

ARR, or Annual Recurring Revenue, is a SaaS KPI that represents the annual recurring revenue generated by customers. Calculating ARR involves taking the monthly recurring revenue (MRR) and multiplying it by 12. So, if we refer back to our example of the recruitment SaaS, we would have:

MRR x 12 = 10,640 x 12 = £127,680/year

3. ARPA

Average Revenue per Account (ARPA) is a SaaS KPI that allows SaaS companies to understand the average value they derive from each account.

To calculate ARPA, you can use the following formula: MRR / Total number of accounts.

If your company generated £10,640 in the month and had 175 active accounts, then your ARPA would be £60.80.

4. ARPC

Average Revenue Per Client (ARPC), not to be confused with ARPA, measures the average monthly revenue generated by a company per client. To calculate this indicator, simply apply the following formula:

ARPC = MRR / Total number of clients.

If your company generates £10,640 per month and has 100 clients, then your ARPC would be £106.40.

5. ARPU

This is the final KPI in this first category of SaaS indicators that we wanted to highlight. ARPU is similar to ARPA and ARPC except that it concerns users, not the number of accounts or clients. It is obtained by dividing MRR by the total number of users.

So, if your recruitment solution generates £10,640 per month for a total of 80 users, it means that your ARPU is £133.

Other SaaS metrics to measure growth

To measure growth effectively, it is better to use a combination of these indicators rather than rely on a single measure. It is also important to compare them to benchmark data from your industry to have a clear idea of your performance.

In addition to MRR, sub-indicators can help refine your analysis:

Gross MRR churn rate

The gross MRR churn rate is an indicator that measures the proportion of revenue lost due to churn and contraction (revenue reduction). It focuses on revenue loss in terms of amount, without taking into account new revenues generated.

To calculate the MRR Churn Rate, follow these steps:

1. First, calculate the total MRR lost over the period due to churn and contraction. This includes the amount from cancelled subscriptions and revenue reductions.MRR lost = (Initial MRR - Final MRR).
2. Then, divide the MRR lost by the Initial MRR to get the gross churn rate. Here's an example to illustrate the calculation:
3. Suppose your SaaS company starts the month with an MRR of £100,000. During the month, it loses £10,000 of MRR due to churn and contraction, so:

MRR lost = (£100,000 - £90,000) = £10,000

Gross MRR Churn Rate = (£10,000 / £100,000) x 100 = 10%

Net MRR churn rate

The Net MRR Churn Rate is an indicator that measures the net change in monthly recurring revenue by considering both lost revenue (churn and contraction) and gained revenue (expansion and reactivation).

To calculate the Net MRR Churn Rate, follow these steps:

1. Calculate the total MRR lost over the period due to churn and contraction. MRR lost = (Initial MRR - Final MRR)
2. Calculate the total MRR gained over the period through expansion (increasing revenue from existing customers) and reactivation (reclaiming revenue from customers who had left but returned). MRR gained = (Expansion + Reactivation)
3. Subtract the MRR gained from the MRR lost to get the Net MRR Churn Rate. Net MRR Churn Rate = (MRR lost - MRR gained)

Here's an example to illustrate the calculation:

Let's say your company starts the month with an MRR of £100,000. During the month, it loses £10,000 due to churn and contraction. On the other hand, it also gains £5,000 through expansion and £2,000 through reactivation. Then:

MRR lost = (£100,000 -£90,000) = £10,000

MRR gained = (£5,000 + £2,000) = £7,000

Net MRR Churn Rate = (£10,000 - £7,000) = £3,000

In this example, the Net MRR Churn Rate is £3,000. This means that, over the analysed period, the company lost £3,000 of net monthly recurring revenue after accounting for both lost and gained revenue.

Upsell Evolution

Upselling, or cross-selling, is vital to increase customer lifetime value. Tracking upsell evolution helps identify opportunities to offer additional products or services to existing customers. This metric represents the increase in revenue from current customers, mainly through their migration to higher-tier plans or additional software fees.

Number of Reactivations

Reactivations refer to former customers who start using the service again. A high reactivation rate may indicate a strong perceived value of the SaaS offering.

New Business

This is the amount spent by new customers when transitioning to a paid subscription.

CAC

Customer Acquisition Cost (CAC) is the total marketing and sales cost divided by the number of new customers acquired.

CAC = (Marketing Costs + Sales Costs + Acquisition Costs) / Number of new customers acquired over a given period

It is crucial to keep it lower than the Customer Lifetime Value (LTV) for profitable growth.

For example, if your SaaS company spent £10,000 on marketing and £5,000 on sales in a month, and acquired 100 new customers this month, the CAC would be calculated as follows:

CAC = (£10,000 + £5,000) / 100 customers

CAC = £15,000 / 100 customers

CAC = £150 per customer

The LTV

The LTV, or Lifetime Value, is the total net value that a customer brings to the company over the course of their relationship. 

A high LTV suggests good long-term profitability of customer relationships. To calculate it, proceed as follows:

LTV = ARPU * Average customer lifetime

As a reminder, ARPU represents the average revenue generated by a customer over a given period, and the average customer lifetime is the average period during which a customer stays with your company before unsubscribing.

If the average revenue of your SaaS solution per user is £50 per month and the average lifetime of a customer is 24 months, then their LTV would be calculated as follows:

LTV = £50 * 24 months = £1,200 per customer

What KPIs for lead acquisition?

To evaluate the effectiveness of lead acquisition, several Key Performance Indicators (KPIs) can be used. Here are some of the main KPIs for measuring this acquisition:

CPL

The Cost Per Lead (CPL) measures the effectiveness of marketing campaigns by dividing the total campaign cost by the number of leads generated. CPL is an important indicator for evaluating the effectiveness of lead generation campaigns. A lower CPL generally indicates more cost-effective lead acquisition, while a higher CPL may signal inefficiencies in marketing strategies or excessive costs compared to the value of the leads obtained. By monitoring and optimising this KPI, you can maximise your ROI in lead acquisition.

Conversion rate

The conversion rate is an essential SaaS KPI used in digital marketing to measure the percentage of people who take a specific action compared to the total number of people exposed to an offer or content. This action can be diverse, such as making a purchase, filling out a contact form, signing up for a newsletter, or downloading a file. The conversion rate is calculated by dividing the number of actions taken by the total number of people exposed to the offer or content, then multiplying the result by 100 to obtain a percentage.

For example, if your website receives 3200 visitors per month and 356 of them make a purchase, the conversion rate of visitors to buyers would be:

Conversion rate = (Number of buyers / Number of visitors) x 100, which equals Conversion rate = (356/3200) x 100, resulting in 11.12%

A high conversion rate generally indicates the effectiveness of a marketing campaign, landing page, or offer, while a low conversion rate may signal the need for optimization to improve results.

Measuring Customer Satisfaction in SaaS

Measuring customer satisfaction in the SaaS sector is essential for understanding and improving the user experience. Here are some commonly used methods for measuring SaaS customer satisfaction:

Churn Rate

Churn, or churn rate, measures the percentage of customers or revenue lost over a given period. A low churn rate is essential for maintaining sustainable growth and is also a key indicator of customer satisfaction. While not always the case, a high churn rate can indicate a lack of satisfaction on the customer's side. To calculate it, you apply the following formula:

Churn Rate = (Number of customers churned during a given period / Total number of customers at the beginning of the period) x 100.

Customer Retention Rate

This KPI measures the percentage of customers continuing to use the service over a given period, essential for evaluating satisfaction and loyalty.

More concretely, it helps measure a company's ability to retain its customers over a given period. It represents the percentage of customers who remain loyal to a company or service for a certain period of time, usually expressed in months or years. Here's its formula:

Customer Retention Rate = [(Number of customers at the end of the period - New customers acquired during the period) / Number of customers at the beginning of the period] x 100.

Ringover offers customer retention strategies that you can draw inspiration from to limit churn.

SaaS KPIs for Sales

Here are some of the key SaaS KPIs related to sales:

Average Sales Cycle Length

This metric indicates the average time it takes for a lead to become a customer. This duration can vary significantly depending on many factors, including the type of product or service, price, complexity of the buying process, and customer preferences. It is useful as it allows the company to refine its strategies. For example, by focusing efforts on certain stages of the customer journey to shorten the sales cycle without rushing them.

ACV

The Annual Contract Value (ACV), or average contract value, represents the average annual revenue per customer contract and is important for understanding the value of long-term customer relationships.

ACV is calculated by adding up the total value of contracts signed during a specific period (e.g., a month or quarter) and dividing that amount by the total number of contracts signed during the same period.

For example, if your SaaS company signed 3 contracts during a month, with values of £1300, £2200, and £1800 respectively, the calculation of the ACV would be as follows:

ACV = (£1300 + £1800 + £2200) / 3 contracts

ACV = £5300 / 3 contracts

ACV = £1766.66 per contract

Conclusion

In summary, to successfully steer a SaaS business, it is crucial to closely monitor these KPIs and use them as a guide to adjust strategies and maximise the company's growth and profitability. By combining thorough data analysis with a strategic understanding of the market and customer needs, SaaS companies can position their business advantageously to succeed in a constantly evolving competitive environment.

To refine their strategy, companies can rely on solutions such as Ringover (cloud communication), Empower (conversational intelligence software), or Cadence (sales prospecting). These three solutions can be combined with existing tools through APIs or integrations.

To learn more about how Ringover products can help you achieve your SaaS profitability goals and reduce your cash burn, start your free trial today.