These metrics are divided into revenue, growth, retention, and efficiency categories.
Definition: Predictable revenue generated from subscriptions each month.
Formula:
[
{MRR} = {Total Number of Customers} * {Average Revenue Per User (ARPU)}
]
Example:
- 200 customers, each paying $50/month.
[
{MRR} = 200 * 50 = \$10,000
]
Analysis Questions:
- Is MRR growing month-over-month (MoM)?
- Which pricing plan contributes the most to MRR?
Definition: The annualized version of MRR.
Formula:
[
{ARR} = {MRR} * 12
]
Example:
[
{ARR} = 10,000 * 12 = \$120,000
]
Insight: ARR is useful for long-term revenue projections and showing stability to investors.
Definition: The cost of acquiring a single new customer.
Formula:
[
{CAC} = \frac{{Sales and Marketing Costs}} / {{Number of New Customers Acquired}}
]
Example:
- Sales and Marketing Costs = $5,000.
- New Customers Acquired = 25.
[
{CAC} = \frac{5,000}{25} = \$200
]
Analysis:
- Compare CAC to Customer Lifetime Value (CLTV) to ensure profitability.
- Lower CAC over time indicates more efficient marketing and sales efforts.
Definition: The total revenue a customer generates during their lifecycle.
Formula:
[
{CLTV} = {ARPU} * {Customer Lifetime (in months)}
]
Example:
- ARPU = $50, Customer Lifetime = 24 months.
[
{CLTV} = 50 * 24 = \$1,200
]
Insight:
Your CLTV should ideally be at least 3 times your CAC. If not, you’re spending too much to acquire customers.
Definition: The percentage of customers who cancel their subscription in a given period.
Formula:
[
{Churn Rate (\%)} = \frac{{Number of Customers Lost}} / {{Total Customers at Start of Period}} * 100
]
Example:
- Customers Lost = 5, Total Customers = 100.
[
{Churn Rate} = \frac{5}{100} * 100 = 5\%
]
Analysis:
- A high churn rate signals issues with product satisfaction, pricing, or support.
- Focus on reducing churn through better onboarding, improved customer support, and proactive retention strategies.
Definition: The percentage of revenue retained, including upsells and expansions, after accounting for downgrades and churn.
Formula:
[
{NRR (\%)} = \frac{{Ending MRR (incl. expansions)}} / {{Starting MRR}} * 100
]
Example:
- Starting MRR = $10,000, Ending MRR = $10,800 (includes upsells).
[
{NRR} = \frac{10,800}{10,000} * 100 = 108\%
]
Insight:
- NRR above 100% means you’re growing revenue from existing customers through upsells or expansions.
Definition: Measures how efficiently your team generates revenue.
Formula:
[
{RPE} = \frac{{Annual Revenue}} / {{Total Number of Employees}}
]
Example:
- Annual Revenue = $1,000,000, Employees = 10.
[
{RPE} = \frac{1,000,000}{10} = \$100,000
]
Insight: Compare RPE to industry benchmarks. High RPE indicates better operational efficiency.
Here’s a simple structure for a SaaS dashboard to track and analyze key metrics.
| Metric | Value | Trend | Action Item |
|------------------------|------------------|-------------------------|----------------------------------------------|
| MRR | $10,000 | 5% MoM | Focus on upselling existing customers. |
| Churn Rate (%) | 5% | from 6% | Optimize onboarding and customer support. |
| CAC | $200 | Stable | Test new marketing channels to lower costs. |
| CLTV | $1,200 | from $1,000 | Explore ways to extend customer lifetime. |
| NRR (%) | 108% | from 102% | Push cross-sell opportunities aggressively. |
Here’s how to analyze your SaaS metrics to identify actionable opportunities:
Scenario:
Your CLTV-to-CAC ratio is 2:1, which is below the recommended 3:1.
Scenario:
Your churn rate increased from 4% to 6% in the past 3 months.
Scenario:
Your NRR is 95%, meaning you’re losing revenue to downgrades and churn.
Use these tools to track and analyze metrics automatically:
Tracks MRR, churn, LTV, and more.
ChartMogul:
Detailed customer analytics for subscription businesses.
HubSpot:
Combines CRM with SaaS metric tracking.
Google Sheets/Excel: