SaaS

The Top 10 SaaS Metrics to Track and How to Calculate Them

Serge Frigon

If you’re like many growing SaaS businesses (software-as-a-service), chances are you’re tuning into data to help drive business decisions. There are so many data points available now to subscription businesses, and getting the most out of all that information can feel daunting.

About 50% of businesses say the use of analytics has directly inspired better performance. Another 64% say it improves their efficiency and productivity.

In the world of SaaS, there are a handful of specific metrics businesses return to again and again to gauge and forecast growth, assess risk, and determine the overall health of their companies. And while each of these metrics can be determined with a formula, there are some great calculators out there that really help to expedite the process and ensure data accuracy.

We did some digging and put together a list of top SaaS metrics calculators so you can pull the numbers you need when you need them in just a few simple steps.

TLDR

  • The most important SaaS metrics measure revenue growth and monitor customer lifecycle and customer engagement.
  • Early-stage SaaS startups should choose a few of the 10 growth metrics below to focus on rather than all of them. These metrics measure overlapping concepts so you should pick those that are most relevant to growing your business.
  • There are many strategies for improving each key SaaS metric, but they generally come back to creating an excellent product with great product-market fit and providing a stellar customer experience to improve revenue retention and drive renewals.

1. Customer acquisition cost (CaC) calculator

Calculator: CaC Calculator

Description of CaC: The total cost to convince a customer to purchase a product or service, or simply, the cost of converting a potential lead into a customer.

Determining your average cost of acquisition (CaC) is critical to understanding the effectiveness of your business model.

The basic formula to determine this is pretty straight forward: it’s your total marketing expenses plus your total sales expenses divided by your number of new customers acquired.

However, there are some important numbers that should be factored into this calculation—but sometimes aren’t—including your sales and marketing teams salaries, the costs of the tools they use, and your overhead, such as rent and equipment.

There’s also the length of your sales cycle to factor in, as well as the possible costs of supporting potential customers through trial periods.

A metric that initially seems simple can actually get quite complex. But it’s important to take the time to get it right. Ex-VP growth at Hubspot Brian Balfour breaks it down here, and even provides an interactive spreadsheet to help you out.

Understanding your acquisition costs comes with many opportunities, such as the following.

  • Explore new marketing techniques: Your CaC report may inspire creativity in how you approach your marketing. For example, using result-driven Link building for startups can also be a valuable strategy to improve your website’s SEO and increase its visibility to potential customers
    About 51% of shoppers say they depend solely on Google to connect with products. This suggests that devoting more to your SEO strategy could be profitable. Your team should also be reviewing the effectiveness of its search engine advertising and optimize around the ads that bring the most customers in for the least spend.
  • Review your business methodology: Is your SaaS business leveraging product-led growth (PLG) to get paying customers signed up and growing with your business? How well are you doing it?
    According to survey results from Openview, 4 in 5 SaaS companies say they’re using at least one PLG tactic, but only 27% say it’s fundamental to their business. Using PLG can be a good way to reduce your CaC.
  • Take another look at your product: When customer acquisition costs are high, it can serve as motivation to consider the performance of your product relative to what is already on the market.
    Making product tweaks could lower your CaC and set you up for future success. Studies show customers are willing to pay up to 18% more on products they view as premium, suggesting that high-value feature upgrades can result in a significant ROI.

2. Customer lifetime value (LTV) calculator

Calculator: LTV Calculator

Description LTV: The projected total value you can expect from a customer during the entirety of your business relationship.

Understanding your LTV (occasionally abbreviated as CLV) can make marketing and sales decisions more straightforward. It’s easier to understand how much money to put towards acquisitions or even how much of a discount you can offer new clients if you know in advance what kind of a return on your investment you’re likely to receive.

Understanding your LTV—as well as your current customers that have the highest LTV—can:

  • help you finetune your marketing efforts and aid in the pursuance and acquisition of customers that provide a higher ROI, and
  • assist you in managing existing accounts to increase profitability while giving the customer a better experience. If you know when customers tend to churn out then you can better manage your customer success strategy.

Knowing your LTV can also help inspire a little bit of creativity on the sales front. For example, it’s easier to extend multi-year discounts and bespoke packages if you have very clear expectations for the ultimate ROI you’ll receive throughout the contract.

Important though LTV is, it’s also underutilized. About 64% of businesses self-report they’re not doing a very good job measuring their LTV. Make sure your business is on the right side of those statistics.

Strategies aimed at improving LTV may focus on increasing the value of initial purchases or increasing the number of purchases over time. The best strategies aim to do both. 

  • You should start with delivering high-quality products or services that meet or exceed customer expectations. Over time, you should continue to innovate and improve your offerings based on what you learn your customers need and prefer.
  • Also, make it a point to provide exceptional customer service throughout the customer journey. Build strong relationships with customers by providing value beyond the initial sale. Offer ongoing support, education, and resources to help customers achieve their goals and get maximum value from your services.
  • Implement customer retention programs and initiatives to reduce churn rates and increase customer loyalty. Offer incentives, rewards, or loyalty programs to encourage repeat purchases and long-term commitment.
  • Upsell and cross-sell additional products, features, or services to existing customers to increase their lifetime value. 

3. Monthly recurring revenue (MRR) calculator

Calculator: MRR Calculator

Description of MRR: The amount of predictable revenue a business can expect to earn on a monthly basis.

One of the biggest benefits of a monthly recurring revenue model is predictability. Using this model, you can have a reasonable idea of the average amount of money you’ll bring in monthly. Almost all SaaS businesses rely on MRR to some extent.

For a very basic look at your MRR:

  • multiply your number of customers by the amount of money your service costs each month. If you have 100 customers all paying $100 a month, your MRR is $10,000.

To get a more accurate estimate:

  • you also need to factor in your average customer gains and your churn rate. For example, if you have 100 customers all paying $100 but each month you bring in five new customers, and lose one, you can estimate an MRR of $10,400 for next month.

You can complicate the arithmetic even further by controlling for how much you spend on acquiring each customer. The more precise you want to be, the more complicated the formula becomes.

But a deep understanding of your MRR can help with future forecasting. It can also enhance the way you understand your cash flow and inform the way you invest in your business.

Improving MRR involves strategies mostly aimed at increasing the total revenue generated on a monthly basis. Here are several approaches to consider:

  • You can start by reviewing your pricing strategy to ensure it aligns with the value proposition of your product or service. Consider adjusting pricing tiers, introducing new pricing plans, or offering discounts to attract more customers while maximizing revenue. One option might be offering usage-based pricing models that align with the specific needs of customers. Charge based on metrics such as usage volume, transactions, or active users to provide flexibility and scalability.
  • Increasing customer retention is a key part of improving MRR as boosting retention rates just 5% can increase profits up to 95%! Take a look at customer feedback and churn reasons and work to address concerns, and improve your overall experience.
  • Of course, expanding your customer base is a good way to increase MRR. Invest in your marketing and sales efforts to reach new prospects and convert them into paying customers. A part of these efforts should also include upselling existing customers onto higher-priced plans.

4. Customer churn calculator

Calculator: Churn Rate Calculator

Description of Churn: Churn is a measure of attrition or loss. It can relate to lost customers, but can also refer to a rate of lost or reduced MRR, contracts, contract value, and more.

Customer churn has a huge impact on your MRR. While some turnover is natural, a high customer churn rate probably indicates there’s something your business can be doing better.

The ways to calculate churn can differ across organizations. And these formulas to calculate churn, as well as the various types of subscriber churn metrics, can get complicated. Apparently, there are more than 40 ways different public SaaS companies account for this metric.

This complexity only emphasizes the fact that understanding your customer churn and retention analytics can help you catch problems early, improve the accuracy of your financial forecasting, and get a better overall understanding of how your business is performing.

Churn can be fixed in two ways:

  • Making sure you’re getting the right customers to start with. After all, if you’re selling an email marketing service to a company who’s really looking for a content marketing platform, they’re going to churn the minute they realize they got the wrong thing. You can address this problem with your marketing team’s targeting, and by ensuring that your sales team is asking the right screening questions.
  • Listening to the customers who are churning and fixing the issues they’ve identified. You can send an end-of-engagement survey or conduct a phone call with outgoing customers. Once you’ve identified the most common reasons customers leave, you can set about addressing it.

5. Annual Recurring Revenue (ARR) Calculator

Calculator: ARR Calculator

Description of ARR: The amount of predictable revenue a business can expect to earn on a yearly basis.

ARR enables you to understand how your subscription SaaS business is doing on a more macro level, as opposed to MRR’s more frequent monthly measurement. It’s relevant to businesses with annual plans, or with monthly-paying customers that make at least a year-long commitment.

When choosing between MRR and ARR, it’s about which best suits your business model.

While both metrics help you gauge the health of your SaaS business, ARR enables you to monitor your year-over-year progress, or how your revenue stacks up over time. It also provides an important baseline to help you predict longer-term future growth, and to make important decisions about the direction of your business.

And being able to show significant ARR growth predictions can help scaling SaaS businesses attract investors.

When it comes to improving ARR, the strategies are the same as improving MRR, as an increasing MRR will result in an increased ARR.

6. Net Promoter Score (NPS)

Calculator: NPS Calculator

Description of NPS: Net Promoter Score (NPS) is a metric used to gauge customer satisfaction and loyalty with a particular product, service, or brand. It measures the likelihood of customers recommending a company’s product or service to others. 

NPS is determined through a survey that typically asks customers a single question: “On a scale of 0 to 10, how likely are you to recommend [company/product/service] to a friend or colleague?”

Based on their responses, customers are categorized into three groups:

  • Promoters (score 9-10): These are highly satisfied customers who are likely to recommend the company to others.
  • Passives (score 7-8): These are satisfied but indifferent customers who may not actively promote the company.
  • Detractors (score 0-6): These are unsatisfied customers who are unlikely to recommend the company and may even speak negatively about it.

Improving your NPS takes time. You need to listen to your customer feedback and focus on improving your customer experience. You may also want to engage with promoters and encourage them to share testimonials or referrals. 

Also note that your NPS needs to be tracked regularly. Many companies run the survey quarterly. 

7. Conversion Rate

Calculator: Conversion Rate Calculator

Description of Conversion Rate: Conversion rate simply means the rate at which some part of your business gets people to take the desired action. At a high level, it’s the measurement of how effective your company is at turning prospects into customers.

Generally in SaaS, this refers to (as a whole) the rate at which the website converts visitors into leads, and the rate at which your sales team then turns those leads into customers. Your marketing team will get far more granular, measuring the conversion rate of singular ads, blog posts, and more.

Calculating conversion rate is very easy. you need to divide the number of conversions (paying customers) by the total number of visitors or leads, and then multiply the result by 100 to get the percentage. The formula is as follows:

Conversion Rate = (Number of Conversions/Total Number of Visitors or Leads)×100

For example, if you had 500 sign-ups for your SaaS product in a month and 10,000 website visitors during the same period, your conversion rate would be:

Conversion Rate=(500/10,000)×100=5%

Improving your conversion rate is ultimately done on a granular level. For instance, improving the conversion rate of your ads by optimizing landing pages, while improving the close rate of your sales team by investing in training. There are some things you will commonly find if you optimize conversion rates for SaaS business, though:

  • Simplify the sign-up process and remove any unnecessary steps that could deter potential customers. Make it easy for users to create an account, start a free trial, or subscribe to your service.
  • Provide prospects with the opportunity to try out your SaaS product before making a purchase. Free trials or demos allow users to experience the value firsthand and increase the likelihood of conversion. You may even consider a freemium option, where you allow customers to experience a limited version of your product for as long as they want.
  • Use A/B testing, heatmaps, and other CRO techniques to analyze user behavior and identify areas for optimization on your website or app. Test different variations of landing pages, CTAs, and pricing models to optimize conversion rates.
  • Tailor your marketing messages to your target audience. Use data-driven insights to segment users and deliver personalized content and recommendations.
  • Showcase testimonials, case studies, and customer reviews to build trust and credibility with potential customers. Highlight success stories and demonstrate how your SaaS product has helped other users solve their problems.
  • Review your pricing strategy and consider offering flexible pricing plans or discounts to appeal to different customer segments. Clearly communicate the value of each pricing tier and highlight any cost savings or additional features.

8. Average Revenue Per User (ARPU)

Calculator: ARPU Calculator

Description of ARPU: ARPU is the KPI used to measure the average revenue generated from each user or customer over a specific period of time. There is a variation of ARPU: ARPA. ARPA stands for Average Revenue Per Account. B2B businesses may prefer to use the account terminology given that a single subscription often contains multiple people.

ARPU is calculated by dividing the total revenue generated by a company within a given period (such as a month or a year) by the total number of active users or customers during that same period. 

ARPU provides insights into the revenue-generating potential of each customer within a given timeframe. It helps businesses understand how effectively they are monetizing their user base and can serve as a benchmark for evaluating the success of marketing strategies, pricing changes, and customer retention efforts.

The formula for calculating ARPU is as follows:

ARPU=Total Revenue/Total Number of Users or Customers

Improving ARPU involves strategies aimed at increasing the average revenue generated from each user or subscriber. Here are some approaches to consider:

  • Offer customers additional products, features, or premium services to upgrade their subscription and increase their overall spending. Consider offering tiered pricing plans to suit different customer needs.
  • Align pricing with the value delivered to customers. Conduct market research and customer surveys to understand the willingness of users to pay for specific features or benefits and adjust pricing accordingly.
  • Implement targeted promotions, discounts, or bundle offers to incentivize users to spend more or commit to longer subscription periods.
  • Explore alternative revenue streams such as advertising, partnerships, or licensing agreements to diversify your revenue sources and maximize ARPU.
  • Focus on improving customer retention and reducing churn. Loyal customers are more likely to renew their subscriptions and contribute to higher ARPU over time.

9. Customer Acquisition Cost Payback Period

Calculator: CAC Payback Period Calculator

Description of CAC Payback Period: CAC payback period indicates the timeframe required for a business to recoup the expenses incurred in acquiring a new customer through marketing, sales, and other acquisition channels. A shorter payback period is generally preferred as it signifies faster recovery of customer acquisition costs and quicker profitability from new customers.

To calculate CAC payback period, divide the total cost of acquiring customers (CAC) by the average monthly revenue generated per customer (ARPU). The formula for calculating CAC payback period is as follows:

CAC Payback Period=CAC/ARPU

Improving CAC payback period takes a two-pronged approach, involving strategies aimed at reducing customer acquisition costs and increasing revenue generated from customers. Using the strategies from either metric will improving your CAC payback period.

10. Monthly Active Users (MAU)

Calculator: DAU/MAU Calculator

Description of MAU: MAU provides insights into the size and engagement level of a product’s user base over a monthly period. It helps businesses understand how many users are actively interacting with their platform or application within a given timeframe and can be used to track user and revenue growth, retention, and overall product performance.

There is a variation of this metric for daily active users (DAU). Businesses that expect their platforms to truly be used on a daily basis will find this metric more helpful. 

MAU is a critical metric for evaluating the success and popularity of digital products and services. A growing MAU indicates increasing user adoption and engagement, while a declining or stagnant MAU may signal issues with user retention or product relevance.

Businesses often use MAU in conjunction with other metrics such as Daily Active Users (DAU), Average Revenue Per User (ARPU), and Customer Lifetime Value (CLV) to gain a comprehensive understanding of user behavior and overall product performance.

To calculate MAU, count the number of unique users who interacted with the product or service at least once during a specific calendar month. Each user is counted only once, regardless of how many times they engage with the platform within that month.

Improving your MAU comes down generally to improving and enhancing your customer experience, providing content and feature updates regularly. For SaaS businesses, offering a helpful onboarding process can also ensure more regular use amongst customers.

The value of SaaS metrics and SaaS calculators

The value of financial data can’t be underestimated if you’re a growing SaaS business. SaaS metrics—including the key SaaS metrics discussed above—provide a strong source of business intelligence and indicate the overall health of your company.

Solid data also serves as a source of insight into the future of your business. This enables you to make confident decisions to guide your growth in the right direction. Because it’s one thing to have the data, and it’s a whole other thing to act on it.


Quick FAQs about SaaS Metrics Calculators

Q: What are the top SaaS metrics calculators for businesses?

The top SaaS metrics calculators for businesses are the CaC Calculator, LTV Calculator, MRR Calculator, Churn Rate Calculator, and ARR Calculator.

Q: Why is the CaC (Cost of Acquisition) important for a SaaS business?

Determining your average cost of acquisition (CaC) is critical to understanding the effectiveness of your business model. It helps to gauge the cost-effectiveness of your marketing strategies and the overall business methodology.

Q: How can understanding the LTV (Lifetime Value) benefit a SaaS business?

Understanding your LTV can make marketing and sales decisions more straightforward. It can help you fine-tune your marketing efforts, manage existing accounts more effectively, and inspire creativity on the sales front.

Q: What is the significance of the MRR (Monthly Recurring Revenue) for a SaaS business?

The MRR helps a business have a reasonable idea of the average amount of money it will bring in monthly. It aids in future forecasting, enhances the understanding of cash flow, and informs the way you invest in your business.

Q: Why is it crucial for a SaaS business to calculate its Churn Rate?

Calculating the Churn Rate can help a business catch problems early, improve the accuracy of financial forecasting, and get a better overall understanding of how the business is performing.

Q: How does the ARR (Annual Recurring Revenue) contribute to understanding a SaaS business’s performance?

The ARR enables you to understand your subscription SaaS business on a more macro level. It helps monitor your year-over-year progress, predict longer-term future growth, and make important decisions about the direction of your business.

Q: How can SaaS metrics benefit a growing SaaS business?

SaaS metrics provide a strong source of business intelligence and indicate the overall health of the company. They serve as a source of insight into the future of the business, enabling confident decisions to guide growth in the right direction.

Q: What factors should be considered when calculating the CaC?

The basic formula to determine CaC includes total marketing expenses, total sales expenses, and the number of new customers acquired. However, other important numbers that should be factored include sales and marketing team salaries, the cost of the tools they use, overhead costs, the length of the sales cycle, and possible costs of supporting potential customers through trial periods.

Q: What can knowing your LTV inspire on the sales front?

Knowing your LTV can inspire creativity on the sales front. For example, it’s easier to extend multi-year discounts and bespoke packages if you have very clear expectations for the ultimate ROI you’ll receive throughout the contract.

Q: How can a deep understanding of MRR aid a SaaS business?

A deep understanding of MRR can help with future forecasting. It can also enhance the way you understand your cash flow and inform the way you invest in your business.


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Written by:

Serge Frigon
Serge Frigon
Director of Product, Stax Bill

Serge Frigon is Stax Bill’s Director of Product. He is passionate about improving billing processes for SaaS companies. With 20+ years in SaaS and billing software systems, Serge has a first-hand view of how important financial insights can be to the health of a company.