25+ growth metrics for SaaS: The key indicators of success

Did you know that the SaaS market has experienced a compound annual growth rate of 25% over the past decade? This impressive growth has been fueled by rapid changes in industry competition, product demand, and the continuous evolution of business models, creating a wealth of new market opportunities.

In SaaS, growth metrics are your compass, guiding you toward sustainable success. These key performance indicators (KPIs) provide critical insights into your business's health, helping you track progress and make data-driven decisions that fuel growth.

In this post, you'll learn:

• The importance of choosing the right metrics for your SaaS business
• 25+ essential growth metrics across various categories, including revenue, sales, customer success, product, and operational metrics
• Best practices for implementing and tracking your chosen metrics
• Tools to simplify metric tracking and analysis

Let’s begin by explaining what SaaS growth metrics truly are.

What are SaaS growth metrics?

SaaS growth metrics are quantifiable measures of your company's performance, specifically concerning its growth over a defined period. Think of them as your key performance indicators (KPIs) that provide key insights into the health and trajectory of your SaaS business.

Growth metrics go beyond basic financial reporting; they delve into various aspects of your business, from revenue generation and customer acquisition to user engagement and customer satisfaction.

How are SaaS growth metrics different from general business metrics?

SaaS metrics are tailored to the unique characteristics of the SaaS model, such as recurring revenue streams, customer churn, and lifetime value. Instead of simply looking at one-time sales, SaaS metrics help you understand the long-term health of your customer relationships and the effectiveness of your growth strategies.

Why selecting the right metrics is linked to scaling

Choosing the right growth metrics is critical for scaling your SaaS business efficiently. By focusing on the metrics that truly matter, you can identify areas for improvement, optimize your strategies, and make data-driven decisions that fuel sustainable growth.

Next, we'll be analyzing 25+ growth metrics for SaaS in more detail, starting with those focused on revenue.

Revenue metrics

In SaaS, revenue is about building recurring streams of revenue that fuel sustainable growth. That's why revenue metrics are so vital. They provide a clear picture of your financial health, allowing you to track your progress, spot areas for improvement, and make informed decisions that drive long-term success.

Let's dive into some of the most crucial revenue metrics for SaaS:

1. Annual Recurring Revenue (ARR)

ARR is the lifeblood of any SaaS business. It represents the predictable, recurring revenue generated from your subscriptions over a year. ARR provides a snapshot of your current revenue performance and serves as a foundation for forecasting future growth.

Formula:

ARR = Sum of all recurring subscription revenue within a year

Example: If you have 100 customers, each paying $100 per month for an annual subscription, your ARR would be $120,000 (100 customers x $100/month x 12 months).

2. Expansion revenue rate

Expansion revenue measures the growth of your existing customer base. This metric includes upgrades, cross-sells, and add-ons. A healthy expansion revenue rate indicates that you're effectively providing value to your customers and encouraging them to spend more.

Formula:

Expansion Revenue Rate = (Expansion Revenue / Starting MRR) x 100

Example: If your starting MRR is $50,000 and you generate $10,000 in expansion revenue, your expansion revenue rate is 20%.

3. Net Revenue Retention (NRR)

NRR provides a holistic view of your revenue retention by considering all revenue streams from your existing customers, including expansion revenue and churn. NRR above 100% indicates that you're growing revenue from your existing customer base, even after accounting for churn.

Formula:

NRR = [(Starting MRR + Expansion MRR - Churned MRR) / Starting MRR] x 100

Example: If your starting MRR is $100,000, then you gain $20,000 in expansion MRR, and you lose $10,000 in churned MRR, your NRR is 110%.

4. Gross revenue churn rate

Gross revenue churn measures the percentage of recurring revenue lost due to customers canceling or downgrading their subscriptions. Keeping a close eye on your churn rate is crucial for pinpointing potential problems and taking corrective action.

Formula:

Gross Revenue Churn Rate = (Churned MRR / Starting MRR) x 100

Example: If your starting MRR is $50,000 and you lose $5,000 in churned MRR, your gross revenue churn rate is 10%.

5. Average Revenue Per User (ARPU)

ARPU is the average revenue generated per user or customer account within a specific period. ARPU helps you understand the revenue potential of your customer base and identify opportunities to increase monetization.

Formula:

ARPU = Total Revenue / Total Number of Customers

Example: If your total revenue is $100,000 and you have 200 customers, your ARPU is $500.

6. Lifetime Value (LTV)

LTV is a prediction of the total revenue you can expect to generate from a single customer throughout their entire relationship with your company. Understanding LTV helps you make informed decisions about customer acquisition costs and retention strategies.

Formula:

LTV = ARPU x Average Customer Lifespan

Example: If your ARPU is $500 and your average customer lifespan is 3 years, then your LTV is $1,500.

7. Recurring revenue growth rate

This metric tracks the month-over-month or year-over-year growth of your recurring revenue. It's a key indicator of the overall health and trajectory of your SaaS business.

Formula:

Recurring Revenue Growth Rate = [(Current Period MRR - Previous Period MRR) / Previous Period MRR] x 100

Example: If your MRR this month is $60,000 and your MRR last month was $50,000, your recurring revenue growth rate is 20%.

Pro tip for revenue growth

Orb's usage-based billing model provides real-time insights into critical revenue metrics. In fact, with Orb, you can:

• Experiment with pricing and adapt to changing market dynamics without limitations.
• Ensure billing accuracy and prevent revenue leakage.
• Get a unified view of your revenue data across all billing and invoicing processes.
• Scale your business confidently with a robust and extensible platform.

Now, let’s move on to the category of metrics to track sales growth.

Sales growth metrics

Sales growth metrics are your compass for navigating the path to customer acquisition, strong retention, and increased revenue generation.

Growth metrics in this category help you understand how effectively you're attracting new customers, converting them into paying users, and maximizing the value of each customer relationship.

Let's explore some of the most important sales growth metrics for SaaS companies.

8. Customer Acquisition Cost (CAC)

CAC is a critical metric that tells you how much it costs to acquire a new customer. It encompasses all the expenses related to sales and marketing efforts, including advertising, salaries, and software. Keeping CAC in check is fundamental for ensuring profitability and making informed decisions about your sales and marketing investments.

Formula:

CAC = Total Sales and Marketing Costs / Number of New Customers Acquired

Example: If you spend $10,000 on sales and marketing in a month and acquire 100 new customers, then your CAC is $100.

9. CAC payback period

The CAC payback period measures how long it takes to recoup the cost of acquiring a customer. A shorter payback period indicates a more efficient sales process and a faster return on investment.

Formula:

CAC Payback Period = CAC / (ARPU - Customer Servicing Costs)

Example: If your CAC is $100, your ARPU is $150, and your customer servicing costs are $20, then your CAC payback period is 8 months.

10. Lead conversion rate

Your lead conversion rate measures how effectively you're converting leads into paying customers. It's a key indicator of the success of your sales and marketing funnel.

Formula:

Lead Conversion Rate = (Number of Customers Acquired / Number of Leads) x 100

Example: If you generate 1,000 leads and acquire 100 new customers, then your lead conversion rate is 10%.

11. Sales pipeline velocity

Sales pipeline velocity measures how quickly deals move through your sales pipeline. A higher velocity indicates a more efficient sales process and faster revenue generation.

Formula:

Sales Pipeline Velocity = (Number of Deals x Average Deal Value x Win Rate) / Sales Cycle Length

Example: If you have 50 deals in your pipeline with an average deal value of $1,000, a win rate of 20%, and a sales cycle length of 60 days, then your sales pipeline velocity is $166.67 per day.

12. Average Contract Value (ACV)

ACV represents the average value of your customer contracts. It's a helpful metric for understanding the revenue potential of your customer base and tracking changes in deal sizes over time.

Formula:

ACV = Total Contract Value / Number of Contracts

Example: If you close 10 contracts with a total value of $100,000, then your ACV is $10,000.

The next category of metrics is about long-term growth by tracking more customer-focused data.

Customer success metrics

Customer success is the engine that drives long-term revenue growth in SaaS. It's about making sure they achieve their desired outcomes with your product and remain loyal, engaged users.

Growth metrics focused on customer success provide valuable insights into customer satisfaction, engagement, and overall health. Let's take a closer look at some of the key metrics in this category.

13. Customer churn rate

Customer churn is the rate at which your customers cancel their subscriptions. It's a crucial metric for understanding customer satisfaction and identifying potential problems with your product or service. A high churn rate can significantly impact your revenue and profitability.

Formula:

Customer Churn Rate = (Number of Churned Customers / Total Number of Customers at the Start of the Period) x 100

Example: If you start with 100 customers and lose 10 customers during the month, then your customer churn rate is 10%.

14. Net Promoter Score (NPS)

NPS measures customer loyalty and satisfaction by asking how likely they are to recommend your product or service to others. It's a valuable metric for gauging customer sentiment and identifying potential advocates or detractors.

Formula:

NPS = % of Promoters - % of Detractors

Example: If 60% of your customers are promoters, 20% are passives, and 20% are detractors, then your NPS is 40.

15. Customer Satisfaction (CSAT)

CSAT measures how satisfied customers are with your SaaS product or specific interactions. It's typically measured through surveys and provides direct feedback on customer experience.

Formula:

CSAT = (Number of Satisfied Customers / Total Number of Customers Surveyed) x 100

Example: If you survey 100 customers and 80 express satisfaction, then your CSAT score is 80%.

16. Customer Effort Score (CES)

CES measures how easy it is for customers to interact with your company and resolve issues. A lower CES indicates a smoother customer experience and reduced friction.

Formula:

While there isn’t a formula really, CES is typically measured on a scale (e.g., 1-5 or 1-7), with lower scores indicating less effort.

Example: A CES score of 1 might represent "very easy," while a score of 5 might represent "very difficult."

17. Customer health score

A customer health score is a composite metric that combines various data points to assess the overall health and likelihood of success for each customer. It can include factors like product usage, engagement, support tickets, and customer feedback.

Formula:

The formula typically involves assigning weights to different factors and combining them to create an overall score. The specific factors and weights will vary depending on your business and the characteristics that indicate customer health.

Example:

Let's say you determine these factors are important for customer health:

• Product usage: Measured by frequency of logins or key feature usage (weighted at 40%)
• Engagement: Measured by participation in community forums or webinars (weighted at 30%)
• Support tickets: Measured by the number of support requests (weighted at 20%)
• Customer feedback: Measured by survey responses or sentiment analysis (weighted at 10%)

You could then create a formula like this:

Customer Health Score = (0.4 x Product Usage Score) + (0.3 x Engagement Score) + (0.2 x Support Ticket Score) + (0.1 x Customer Feedback Score)

Each factor would have its own scoring system. For example, product usage could be scored on a scale of 1-10 based on login frequency, while support tickets could be scored inversely (higher score for fewer tickets).

By adjusting the weights and scoring systems, you can tailor the customer health score to reflect the factors that are most important for your business.

18. Retention rate by cohort

Analyzing retention rates by cohort involves grouping users based on shared traits (e.g., sign-up date or acquisition channel) and tracking their retentionover time. It helps identify trends and patterns in customer behavior and optimize retention strategies for different customer segments.

Formula:

Retention Rate = (Number of Customers Retained in a Cohort / Total Number of Customers in that Cohort at the Start of the Period) x 100

Example: If you have a cohort of 100 customers who signed up in January and 80 of them are still customers in February, then your retention rate for that cohort is 80%.

Now, if you want to focus more on product development, then this next category of data tracking is best for you.

Product growth metrics

Product growth metrics offer insights into how users interact with your product, from initial adoption to ongoing engagement and satisfaction. These metrics help you understand what's working well, identify areas for improvement, and ultimately drive product-led growth.

Metric development in this area often involves tracking user behavior, feature usage, and feedback to measure the success of your product strategy. Let's explore some of the most important product growth metrics for a SaaS business.

19. Daily Active Users (DAU)

DAU measures the number of unique users who interact with your product daily. It's a key indicator of user engagement and product stickiness. Tracking DAU helps you understand how frequently users rely on your product and identify trends in usage patterns.

Formula:

There isn’t an actual formula. DAU is simply the count of unique users who interact with your product on a given day.

Example: If 1,000 different users log in to your application on a particular day, your DAU for that day is 1,000. Comparing your scores over time will show you when users were most active.

20. DAU/MAU ratio

The DAU/MAU ratio compares your daily active users to your monthly active users. It provides a measure of user stickiness and the frequency of product usage within a month.

Formula:

DAU/MAU Ratio = DAU / MAU

Example: If your DAU is 1,000 and your MAU is 5,000, then your DAU/MAU ratio is 20%, indicating that, on average, 20% of your monthly active users engage with your product daily.

21. Feature adoption rate

Feature adoption rate measures how quickly and widely users adopt new or existing features within your product. It's a valuable metric for understanding the value and usability of your features and identifying areas for improvement.

Formula:

Feature Adoption Rate = (Number of Users Who Adopted a Feature / Total Number of Users) x 100

Example: If you release a new feature and 500 out of your 1,000 users adopt it, then your feature adoption rate is 50%.

22. Time to First Value (TTFV)

TTFV measures the time it takes for a new user to experience the core value of your product. A shorter TTFV indicates a more effective onboarding process and faster user activation.

Formula:

Again, there isn’t really a formula for this metric. TTFV is typically measured in units of time (e.g., hours, days) from the user's initial signup.

Example: If it takes a new user, on average, 2 days to successfully complete a key task that demonstrates the core value of your product, your TTFV is 2 days.

23. Retention rate by feature

Similar to cohort analysis for overall retention, you can track retention rates for features. This helps you understand which features are most engaging and contribute to user retention.

Formula:

Retention Rate by Feature = (Number of Users Who Continue to Use a Feature / Total Number of Users Who Adopted the Feature) x 100

Example: If 100 users adopted a new feature and 80 of them continue to use it after a month, then your retention rate for that feature is 80%.

24. Average session length

Average session length gauges the average duration of a user's session within your product. Longer session lengths often indicate higher user engagement and signal users are overall happy with how your solution is performing.

Formula:

Average Session Length = Total Time Spent by All Users / Number of Sessions

Example: If users across all sessions spend a total of 10,000 minutes in your product and there were 500 sessions, then your average session length is 20 minutes.

The next very important category of metrics to remember has to do with all of your maintenance fees to run the business.

Operational metrics

Operational metrics provide a window into the sustainability of your SaaS company. These metrics go beyond revenue and customer growth to assess how effectively you're utilizing resources and managing costs.

Growth metrics in this category are paramount for making 100% sure your business operates smoothly and remains financially healthy in the long run. Let's dive into some of the most important operational metrics for a SaaS company.

25. Burn rate

Burn rate measures how quickly your startup is spending its available cash. It's a vital metric for understanding your runway — how long you can operate before needing additional funding. Monitoring your burn rate helps you make informed decisions about spending, investment, and fundraising.

Formula:

Burn Rate = (Starting Cash Balance - Ending Cash Balance) / Number of Months in the Period

Example: If you start with $1,000,000 in cash and have $800,000 remaining after three months, then your burn rate is $66,667 per month.

26. Gross margins

Gross margin is the difference between your revenue and the cost of goods sold (COGS), expressed as a percentage of revenue. It reflects your profitability after accounting for the direct costs associated with delivering your product or service. Healthy gross margins are fundamental for reinvesting in growth and ensuring long-term sustainability.

Formula:

Gross Margin = (Revenue - COGS) / Revenue x 100

Example: If your revenue is $1,000,000 and your COGS is $400,000, then your gross margin is 60%.

27. Revenue per Employee (RPE)

RPE measures the revenue generated per employee. It's a key indicator of your team's productivity and the efficiency of your operations. Higher RPE generally suggests that your team is effectively contributing to revenue generation.

Formula:

RPE = Total Revenue / Number of Employees

Example: If your total revenue is $1,000,000 and you have 50 employees, then your RPE is $20,000.

Advanced metrics for mature SaaS

As your SaaS company matures, it's time to shift your focus to optimizing performance and achieving sustainable growth. This involves exploring more advanced metrics that provide deeper insights into your business operations.

Let's explore some of these advanced metrics.

28. Magic number (SaaS efficiency metric)

The magic number gauges the efficiency of your sales and marketing spend in generating revenue growth. It helps you understand how effectively you're converting investments into revenue.

Formula:

Magic Number = (Current Quarter Revenue - Previous Quarter Revenue) / Previous Quarter Sales and Marketing Spend

Example: If your revenue this quarter is $1,200,000, your revenue last quarter was $1,000,000, and your sales and marketing spend last quarter was $200,000, then your Magic Number is 1.0.

Note: A Magic Number of 1.0 or higher generally indicates efficient spending, while a lower number suggests that you might need to re-evaluate your sales and marketing strategies.

29. Time to Value (TTV)

TTV measures the time it takes for a customer to realize the value of your SaaS product. It encompasses the entire customer journey, from initial awareness to achieving their desired outcomes.

Formula:

TTV is typically measured in units of time (e.g., days, weeks, months) from the customer's first interaction with your company.

Example: If it takes a customer, on average, 4 weeks from their initial contact to successfully implement your product and achieve their desired results, your TTV is 4 weeks. A shorter TTV indicates a better customer journey and faster value realization — all leading to happier, returning customers.

Best practices for implementing and tracking metrics

Implementing and tracking the right growth metrics is an ongoing process that requires careful planning and execution. Here are some best practices to guide you:

• Prioritize metrics aligned with your business goals. Your choice of metrics should depend on your specific objectives.
  
  If you're in a growth phase and focused on scaling, prioritize revenue-related metrics like ARR and customer acquisition cost. If you're a more mature company focused on retention, prioritize metrics like customer churn and net revenue retention.
• Avoid vanity metrics that don't drive actionable insights. It's easy to get caught up in tracking metrics that look impressive but don't provide meaningful information.
  
  Focus on metrics that offer clear insights into your business performance and guide your decision-making. For example, instead of simply tracking website traffic, track the conversion rate of visitors into leads or customers.
• Regularly review and refine your tracking process. Your business and its goals will evolve over time, so it's important to periodically review your chosen metrics and adjust your tracking process accordingly.
  
  Make absolutely sure you're capturing the most relevant data and that your metrics are still aligned with your current objectives.
• Use a mix of qualitative and quantitative data for a holistic approach. While quantitative data provides valuable numerical insights, qualitative data — like customer feedback and surveys — adds depth and context.
  
  By combining both types of data, you can gain a more complete understanding of your business performance and customer experience.

Tools to simplify metric tracking and analysis

Tracking and analyzing your SaaS growth metrics doesn't have to be a daunting task. Several powerful tools can simplify the process, providing valuable insights and saving you time. Here are a few popular options:

• Mixpanel: Mixpanel allows you to track user behavior, analyze conversion funnels, and segment users for targeted insights. It's particularly useful for understanding how users interact with your product and optimizing user engagement.
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• Tableau: A leading data visualization tool, Tableau helps you create interactive dashboards and reports that bring your data to life. It's particularly useful for visualizing trends, identifying patterns, and communicating insights effectively.
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• HubSpot: HubSpot offers a suite of tools for tracking marketing and sales performance, including lead generation, conversion rates, and customer lifetime value. It's particularly helpful for managing your sales pipeline and optimizing your marketing campaigns.
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• ChartMogul: ChartMogul provides in-depth subscription analytics, including churn rate, MRR, and LTV. It's a valuable tool for understanding the financial health of your SaaS business and tracking key revenue metrics.

Quick comparison: Startups vs. mature SaaS

• Startups: Early-stage startups often prioritize tools that are easy to implement and offer basic tracking features. Mixpanel and ChartMogul are popular choices, with core product and subscription analytics to help startups understand their initial traction and growth.
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• Mature SaaS: As your business scales, you might need more advanced features, such as custom reporting and deeper integrations. Tableau and HubSpot cater to these needs, offering more robust features for data visualization and marketing automation.

Pro tip: Automating your metric tracking can save you lots of time and help with data accuracy. Many tools offer automated reporting features, allowing you to schedule regular reports and receive timely updates on your key metrics.

Orb:Aligning your billing with your business goals

As we've discussed throughout this article, choosing the right growth metrics is crucial for achieving your business objectives. But what if your billing system hindered your ability to track and analyze those metrics effectively?

Orb empowers you to align your billing with your business goals. Our usage-based billing platform provides the flexibility and granularity you need to track the metrics that matter most, whether it's MRR, customer churn, or feature adoption rate.

Here's how Orb can help you implement the best practices for metric tracking:

• Prioritize key metrics with a single source of truth: Orb's flexible pricing engine allows you to get financial reports with the metrics that are most important for your specific goals, whether it's maximizing revenue or improving user retention.
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• Avoid vanity metrics: With Orb, you can focus on the metrics that truly drive actionable insights. Our detailed billing data and usage tracking help you understand the real drivers of your business growth.
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• Regularly review and refine your tracking: Orb's customizable dashboards and reporting tools make it easy to monitor your progress, spot trends, and adjust your strategies as needed.
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• Use a mix of qualitative and quantitative data: Combine Orb's quantitative billing data with qualitative customer feedback to gain a holistic view of your business performance.

Ready to unlock the full potential of your billing and gain a deeper understanding of your SaaS growth metrics? Browse the Orb user guides here.

Check out Orb and our flexible pricing options to find a plan that works for your business.