12 SaaS KPIs: Growth and Revenue, Sales, Marketing and Customer Success (2024)

We discuss everything software-as-a-service (SaaS) businesses need to understand about keyperformance indicators (KPIs), including which KPIs are essential, formulas, examples,calculations and benchmarks. In addition, we provide a downloadable cheat sheet.

Inside this article:

SaaS KPIexamples
The functionalareas to calculate KPIs
How to choose KPIsfor your SaaS company
DownloadableSaaS KPI cheat sheet

What Are SaaS KPIs?

KPIs are performance measures that inform decisions. KPIs can be high-level, such as relativemarket share, or more actionable and individual, such as a salesperson or team'swin/loss ratio. SaaS companies, whetherB2B or B2C, need to select KPIs that show progress toward whatever will grow their marketshare and illuminate areas that need improvement.

Calculating lower-level KPIs in conjunction with high-level KPIs can give staff a 360-degreeperspective on how their activities affect the company as a whole. For example, say yourbusiness offers a free version of its software product. A lower-level KPI could be theconversion rate of people who try the free version and then sign up for a paid subscription.A related high-level KPI for the company would be growth in monthly recurring revenue.

Reviewing the trends in these KPIs over a few months gives a good indication of howsuccessful that free version is in attracting new customers and how much income they bring.

Key Takeaways

Develop KPIs to track your business development progress.
Build the right KPIs for your SaaS business by tracking key areas like revenue andgrowth, marketing, sales and customer success.
Apply KPI benchmarking to see where you stand in your industry.
Use a dashboard to set up automatic KPI generation so you can see your progress in oneplace.

SaaS KPIs vs. SaaS Metrics

Both SaaS KPIs and SaaS metrics are essential. KPIs convertmetrics into goals, making them actionable targets. For example, the number ofpositive customer ratings is a useful metric, but the Net Promoter Score KPI can help youbenchmark your business. You should always track metrics that show data about your keybusiness areas and consider turning these metrics into KPIs.

An example is a new marketing campaign. Let's say you develop a campaign of ads andoptimized landing pages. You can track the metric of marketing qualified leads (MQLs). Thismetric tells you how many leads came in from those links. Measure this effort overall bycalculating the KPI conversion rate — how many of those leads converted to customers.Further, you can compare your results to others across your industry with benchmarking tosee if you are competitive.

Why SaaS KPIs Are So Important

SaaS businesses cannot rely on the same strategies as traditional product companies. When youdepend on recurring revenue, you must have the right finance metrics in place so you canreact quickly to any declines.

SaaS businesses are fast-paced. Because the business model makes enrollment easy, it is alsoeasy for customers to churn. SaaS business can scale fast, but that puts pressure on salesand marketing teams to sign on new customers. KPIs can be early signals of positive andnegative effects of actions your staff takes. Well-chosen KPIs can guide the company tofocus on what is working and eliminate what is not.

Four Areas Your SaaS KPIs Should Cover

Your SaaS KPIs should cover four main areas: revenue and growth, marketing, sales andcustomer success. Even if you decide to track only a few KPIs, make sure to cover theseareas as measures of your overall business success:

Revenue and growth: Companies, especially startups, may struggle toachieve a regular revenue stream and continued revenue growth. These KPIs provide anessential gauge.
Marketing: These KPIs show how well a company generates interest in itsproducts, so potential customers know about them and see their value.
Sales: These KPIs describe the success of moving potential customersthrough the sales pipeline.
Customer success: Customer-success KPIs for SaaS detail how satisfiedcustomers are with the product, show that it works for them and that your staff solvesany challenges they may have.

SaaS KPI Matrix by Function

In developing SaaS KPIs, consider functional areas. For example, marketing may generate manyleads from a digital campaign. They calculate their MQLs. When sales gets these leads, theremay be only a few they can call. These sales-qualified leads (SQLs) show prospects ready tomake a decision. Now those leads become converted customers.

The customer success team is then responsible for helping them figure out and best use theproduct. Without this attention, customers might drop their subscriptions, and that willincrease the churn rate. Acquiring new and keeping current customers ties into MRR andgrowth.

Here is a sample matrix to decide which KPIs to use:

Most Important SaaS KPIs

The most important SaaS KPIs are churn, monthly recurring revenue (MRR), customer lifetime value(CLV) and customer acquisition cost (CAC). These deliver essential insights intoyour customers, as well as your company's financial health and prospects.

Beyond those four KPIs, many firms track customer acquisition cost, average revenue peraccount and quick ratio; the results can help you manage and grow your SaaS business. Thelist below shows the most common KPIs for SaaS businesses, their formulas and how tocalculate them.

Monthly Recurring Revenue (MRR):

Monthly recurring revenue tracks monthly money coming in from new sales, upgrades andrenewals. MRR subtracts churn if you already have a calculated figure.

MRR = (total accounts forthe month) x (rate in $ per account)

MRR is an excellent way to understand the present performance of your company and set monthlygrowth goals. In a simple example, if you have 500 customers paying you $15 per month, yourMRR = $7,500. Do not include revenue that is one-time-only.

Annual Run Rate (ARR):

Also known as annual recurring revenue, ARR is the yearly version of MRR. This KPI helps youproject your future income, assuming that your business will not change significantly interms of gaining new customers or churn.

ARR = (total accounts forthe year) x (rate in $ for each account)

You can also calculate ARR by multiplying your MRR by 12. This method does not considerseasonal trends or fluctuations, such as gaining one big customer in a month. Largeenterprise companies often use ARR as a replacement for MRR when they have mainly annualcontracts.

For example, say your company has 5,000 accounts that pay $1,200 annually. The ARR = 5000 *$1,200 = $6,000,000. As we showed above in the MRR calculation, you can also include morecomplex figures if you have them. Businesses will have different goals for MRR versus ARR.

Churn Rate:

Churn rate is a measurement of customer attrition. Measure this KPI over agiven period, such as 30 or 90 days. The period depends on the other metrics you willevaluate churn rate with, such as MRR. These are the customers canceling theirsubscriptions.

Churn rate = (# customerscanceling / total # of customers) x 100

This KPI should include only paying customers, not those on free versions of your software.For example, if 2,300 customers out of 200,000 total canceled last month, your churn rate =1.15%.

You can also group customers into cohorts based on when they signed up to use your softwareand calculate their churn separately. Grouping into cohorts allows you to compare differenttiming of cancelations to see if there are issues in the software over a longer term.

Revenue Churn:

Revenue churn is specific to lost revenue, not customers, although your customer losses driveit. First, calculate the number of customers lost in the period and what they were paying.

Revenue churn =
(revenue lost from lost customers in period) /(total revenue at beginning of period) x 100

Use gross or net revenue churn. Net income is different only because it adds back in anyextra revenue from current customer upgrades. Calculate revenue churn over a specificperiod; for example, you could calculate either monthly or yearly revenue churn.

In a SaaS business with $400,000 in annual revenue from current customers, the business lost$20,000 in canceled subscriptions over the year. Gross revenue churn = $20,000 / $400,000 x100 = 5%. Taking into account customer upgrades, you can also calculate net revenue. If thissame business earned an extra $4,000 in upgrades, its net revenue churn = ($20,000 - $4,000)/ $400,000 x 100 = 4%. Industry standards for revenue churn are the same as churn rate.

Conversion Rate to Customer:

Conversion rate to customer, also known simply as conversion rate, is the percentage ofcustomers who advance from the free — sometimes called “freemium” —version ofyour software to the paid version.

Conversion rate to customer=
(# freemium customers who go to paid software) / (# freemium customers) x 100

The conversion rate could also be the number of website visitors who eventually sign up topurchase your product or the number of sales leads that become customers. Regardless of theprocess you consider relevant for your conversion rate, the calculation is the same.

The Average Revenue per Account (ARPA):

ARPA is the payment amount per account for a period. ARPA helps companies see the averageprice points for new customers over time and can help improve sales and pricing.

ARPA = MRR / # of accounts

ARPA can also help companies figure out which products are the best revenue generators.Customers can have multiple accounts. Calculate this KPI at the account level, and choose aconsistent period, such as annual (substitute ARR for MRR) or month.

For instance, say a company has 2,000 accounts and generates $400,000 in revenue annually.The ARPA = $400,000/2,000 = $200 per year. There is no widely accepted industry standard forARPA. Companies hope that it increases over time.

Customer Lifetime Value (CLV or LTV):

CLV is the revenuecustomers bring over their contract's life. Churn rate is a big part of this metric,especially when you average your customers together. Therefore, the periods for churn, ARPAand CLV should be the same in this calculation.

CLV = (1/churn rate) x ARPA

For example, a company has a churn rate of 10% and an ARPA of $25. Both are monthly rates.The CLV = 1/10% x $25 = $250 for users with monthly subscriptions. There is no industrybenchmark for CLV.

Customer Acquisition Cost (CAC):

Customer acquisition cost (CAC) is a KPI that shows how much a business spends to get newcustomers. It can also show how long it takes to recoup that investment with customerrevenue. This KPI is for the costs of sales and marketing.

CAC = (total cost ofsales and marketing) / (# new customers)

Companies can use CAC to show whether they can afford to put more money toward acquiring newcustomers. For example, a company spent $20,000 last month on salaries for salespeople and amarketing campaign. From these efforts, it brought in 2,000 new customers. Its CAC =$20,000/200 = $100 per customer. Use this figure to determine how long it would take to payfor the initial investment to get these customers and whether it's worth the effort.

Another good KPI is using CAC and CLV in a ratio. For example, if that same company had a CACof $100 and a CLV of $300, the CLV:CAC ratio = $300 / $100 = 3 (or 3:1).

Net Promoter Score (NPS):

NPS is a measure of customer satisfaction and loyalty. This KPI shows your customers'willingness to promote your products to their friends and associates.

NPS = (# promoters / total # of survey respondents x 100) - (# detractors / total # of survey respondents x 100)

First, companies send out simple surveys asking how likely it is people would recommend theirproduct or brand. Then, the program groups responses as promoters (9-10) or detractors (lessthan 7), ignoring scores of 7 and 8.

Response rates for NPS surveys can vary widely. The more responses you receive, the moreseriously you can take the survey results. Once you have all your users' scores in,throw out the neutral (7-8) scores and calculate promoters and detractors. For example, acompany had 120 email NPS surveys returned last month. Fifty of those surveys werepromoters, 20 were detractors and 50 were neutral. Their NPS = (50/70) – (20/70) x 100=42.8.

Quick Ratio:

A quick ratio is a difference between MRR added and lost. This KPI shows the direction ofyour growth by month. Quick ratio includes all new bookings, expansions (upgrades),contractions (downgrades) and churns for the month.

Quick ratio = (MRR added+ expansion MRR) / (MRR downgrade + Churn MRR)

For example, last month, a company had $15,000 in MRR through new bookings, $2,000 inupgrades, $1,000 in downgrades and $2,000 in churn. The company's quick ratio =($14,000 + $2,000) / ($1,000 + $3,000) = 4. A quick ratio score of four is a good benchmark,showing that you can replace every dollar lost with $4. Scores of 1-4 still show growth, butthose companies must work very hard to keep up new bookings.

Net Burn Rate:

Net burn rate is how much money a company spends of its capital each month. This KPI showsthe health of the company and accounts for MRR.

Net burn rate = grossburn amount - MRR

For example, a company is spending $30,000 monthly in expenses and is bringing in $20,000 inMRR. The net burn rate = $30,000 - $20,000 = $10,000. Burn rates are seen only in companiesthat are still losing money. If that same company had venture capital of $180,000 left andits burn is $10,000 per month, it still has 18 months left in business, assuming it gets nonew funding.

Viral Growth:

Viral growth, also known as a viral coefficient, is the number of new users a current usercreates. This SaaS business KPI is an incentive for customer referrals and is generated byword of mouth.

Viral growth = (#invitations sent from current users) xconversion % / 100

Viral growth is a good indicator of company growth. For example, say your company has 100customers. On average, they generate three referrals each. If 100 of those referrals becomecustomers, the viral growth = 300 referrals x 33% /100 = 1. This finding means that everycustomer brings in one other customer. Anything above one is a good viral coefficient andhelps to bring down your CAC.

Use this downloadable SaaS KPI cheat sheet to help you with your formulas:

How to Choose the Right KPIs for Your SaaS Company

To choose the right KPIs for your SaaS company, consider the current growth phase of yourbusiness. Startups should pick KPIs that focus on funding, customer satisfaction and provingtheir product has a market. A seasoned SaaS business should choose KPIs that are aboutgrowth.

In companies with a long history, KPIs should be about efficiency. For example, CAC and howmuch revenue each employee generates. Other tips for picking KPIs for your business include:

Choose KPIs aligned with your business strategy: Start with thecompany's strategic goals. For example, you may want your B2B SaaS business tobuild products that outperform competitors. Your product development KPIs are key, as isyour NPS.
Choose attainable KPIs: If needed data is too hard to acquire,it's not worth trying to measure.
Be specific in your KPIs: Use KPIs that are specific for the departmentor individual. High-level KPIs are great to show shareholders in quarterly meetings, butstaff need more concrete KPIs where they can see a change. For example, your sales repsneed targets. Consider measuring their sales by contact methods and their personal leadconversion rates.
Make sure your KPIs are accurate: Ensure the KPIs you choose actuallysay what you think they do. For example, if you want to show your ARPA but discount thediffering rates customers have, you may miss the granularity of which products are themost successful.
Review your KPIs periodically: Ask whether your current group of KPIsstill make sense and are still leading your business to success or if they have grownstale. If your business has changed, your KPIs should also change.

Tips for Tracking SaaS KPIs

Tracking KPIs is more than setting them up and trotting them out occasionally. Start bymeasuring them consistently and offering employees a singular source to see their KPIs.

Additionally, you should store your KPI data in a library so you can see changes over time.Take advantage of tools available in the marketplace. For example, smart tools andtechnology offer tracking systems or automatically generate regular reports. Many companiesfind tracking their KPIs labor-intensive, but it does not have to be if you use availablesolutions.

Consider SaaS KPI tracking dashboards to store your data in a central location and make iteasily accessible. Interactive dashboards take the manual labor out of your calculations. Itmay be possible to calculate your KPIs manually, but automation does the calculations muchfaster and more efficiently. Dashboards help your company respond to changes quickly.

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