Top SaaS Metrics You Should Track

As the SaaS industry continues to boom, tracking the right metrics becomes essential to growing your business. By measuring the right key performance indicators (KPIs), you gain insights into how customers use your product, where problems may exist, and which levers you can pull to improve performance.

You can track many metrics as a SaaS business, but some are far more important than others. The most important metrics will depend on your business goals and growth stage. In general, the top metrics to focus on tend to center around four main areas:

• Customer acquisition and activation
• Usage and engagement
• Revenue and financials
• Operational efficiency

At the earliest stages, customer acquisition metrics like MRR, churn, and lifetime value take priority. As your product matures and finds product-market fit, engagement, and usage metrics become increasingly important to improve the product and drive recommendations and expansion within accounts.When determining which metrics to track, ask yourself the following:

• What insights will this provide into how customers use and value my product?
• Will optimization of this metric likely improve other metrics that matter most?
• How quickly can I gather and analyze this data to take meaningful action?
• Is this metric within my control or heavily influenced by external factors?

With these factors in mind, here are the top SaaS metrics you should consider tracking, organized by the main categories:

Customer Acquisition & Activation

Monthly recurring revenue (MRR)

This measures the recurring revenue generated from subscriptions. MRR is a leading indicator of future revenue growth opportunities.

Churn rate

This is the percentage or count of customers who cancel their subscription within a given period. The churn rate needs to remain below a threshold for a sustainable business.

Customers acquired

The number of new customer accounts signed up within a given period (weekly, monthly).

Lifetime value (LTV)

The total revenue expected from customers over their lifetime is based on historical data of similar customers.

Cost of customer acquisition (CAC)

The average amount spent to acquire a single customer. Keeping CAC below LTV is critical.By tracking metrics like MRR, churn, customers acquired, customer lifecycle, and LTV, you gain a thorough understanding of how successful your acquisition funnel is at each stage - from reaching prospects to converting leads to retaining customers. Any bottlenecks or issues in the process often become visible through anomalies or trends in these metrics.

Usage & Engagement Metrics

Some key usage and engagement metrics to track include:

Active users

The number of unique users accessed your product within a specified period (daily, weekly). Can segment by the plan.

Monthly active users (MAU)

The number of unique users accessed your product within the last 30 days.

Monthly engagement

The average number of times per month your active users interact with the product. It could be pageviews, actions taken, time spent, etc.

Feature usage

Data on which specific features and products are being used the most. It is helpful in determining where to optimize or invest in new development.

Cohort engagement

Engagement metrics are tracked over time for specific cohorts of customers. It is helpful in identifying attrition and engagement drop-off points.

Net promoter score (NPS)

A customer satisfaction metric based on the likelihood that customers would recommend your product. Higher NPS correlates with higher retention.Tracking these usage metrics will reveal how customers interact with your product beyond just subscriptions and revenue. Changes in engagement can serve as early warning signs of issues or indicate where improvements are needed.

Revenue & Financial Metrics

Of course, revenue and financial metrics remain critical for SaaS businesses:

Revenue (MRR, total, YoY growth)

Total monthly and annual recurring revenue from subscriptions. Track growth year over year.

Gross margin %

Gross profit divided by total revenue. Track how well your costs scale relative to growth.

Net revenue retention (NRR)

The percentage of revenue retained from existing customers period over period. Higher NRR means less need to acquire new customers.

Expansion rate

The percentage of existing customers who upgrade or purchase additional products.

Debt to equity ratio

Total debt is divided by shareholder equity. Indicates financial risk and stability. Keep this ratio <1.

Days sales outstanding (DSO)

The average number of days it takes for customers to pay invoices. Lower DSO means faster cash flow.While most SaaS metrics correlate with revenue and growth to some extent, income remains the ultimate bottom line. Monitor revenue metrics regularly to spot deviations from targets or forecasts early.

Operational Efficiency Metrics

Finally, optimizing processes and efficiency helps accelerate growth:

Customer support ticket volume

The number of emails, chats, or calls from customers needing help. Relates to product usability and documentation.

Customer support response time

The average time it takes your team to initially respond to customer queries. Faster is better.

Downtime

The total amount of time your product was unavailable due to outages. Aim for <1% downtime.

Release velocity

The frequency at which you release product updates and improvements. Faster release cycles correlate with faster innovation.

Team capacity utilization

The percentage of available team hours spent on activities that directly generate value. Optimal is around 70-80%.

Error rate

The percentage of API calls, form submissions, or other automated events that result in errors. Aim for a <1% error rate.

Support ticket resolution time

The average time it takes your team to fully resolve customer tickets. Faster is more efficient.Operational metrics related to efficiency, release speed, uptime, and customer support indicate how well your processes and product are optimized to deliver value at scale. The more efficient your operations, the faster you can grow.

The importance of product demos for SaaS businesses

In addition to tracking the key metrics discussed above, offering effective product demos is critical for customer acquisition, engagement, and retention. Potential customers want to see and try your product for themselves before committing. And for existing customers, demos provide opportunities for expansion, onboarding new users, and sharing updates. The Folio product demo tool makes it easy to build impactful demos that improve your sales, onboarding, and support processes. The entire platform is designed around the needs of SaaS product and revenue teams.

Conclusion

Tracking the right SaaS metrics will provide key insights to optimize your product, improve customer experience, and accelerate growth. The most important metrics will depend on your business goals and growth stage, so focus on a few that will move the needle the most for your situation.While individual metrics are valuable on their own, looking for correlations between metrics across the different categories is even more powerful. For example, improvements in features or engagement could point to opportunities to increase expansion rates and lifetime value. Faster release cycles might correlate with lower churn.

By testing hypotheses, experimenting with optimizations, and tracking how various metrics change together, you'll develop a more holistic understanding of what drives value for your customers. With the right metrics in place, data can become your most valuable tool for building a successful SaaS business. Keep measuring, learning, and improving; your product and growth will follow.

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