The SaaS business model thrives on data. Growth, retention, and revenue depend on tracking the right performance indicators. But not all KPIs are created equal. Some metrics look good in reports but offer little real insight. Others act as true performance drivers, guiding strategy and decision-making.

For a SaaS company, understanding key metrics is the difference between sustainable growth and stagnation. The right KPIs help teams make informed decisions, identify bottlenecks, and fine-tune operations. Here are eight essential KPIs every SaaS business should track.

Monthly Recurring Revenue (MRR)

Revenue is the heartbeat of any SaaS company, and MRR provides a predictable measure of income. It reflects all recurring subscription revenue in a given month, offering clarity on financial stability.

An increasing MRR signals business growth. A declining MRR? That’s a red flag. Breaking MRR down into new, expansion, and churned revenue offers even deeper insights into how customers interact with your service.

Customer Churn Rate

Not all customers stick around. Churn rate measures the percentage of users who cancel their subscription over a specific period. A high churn rate is a warning sign – it means users aren’t finding enough value to stay.

Reducing churn requires understanding why customers leave. Is the onboarding process weak? Are there technical issues? Tracking churn helps pinpoint these weaknesses and refine retention strategies.

Customer Acquisition Cost (CAC)

Growing a SaaS business isn’t just about bringing in new customers – it’s about doing so efficiently. CAC calculates the cost of acquiring each new customer by dividing total marketing and sales expenses by the number of new customers in a given period.

A sustainable SaaS model requires keeping CAC lower than the revenue a customer generates. If acquiring a user costs more than they’re worth, scaling becomes difficult.

Customer Lifetime Value (LTV)

LTV estimates the total revenue a business can expect from a single customer over their entire engagement. It’s a crucial metric for understanding profitability and long-term growth.

LTV and CAC go hand in hand. Ideally, LTV should be significantly higher than CAC – a 3:1 ratio is often cited as a healthy benchmark. If LTV is too low, increasing customer retention or pricing adjustments may be necessary.

Net Revenue Retention (NRR)

New customers are great, but revenue expansion within the existing user base is even better. NRR measures revenue growth from current customers, factoring in upgrades, downgrades, and churn.

A SaaS company with an NRR over 100% is growing without even acquiring new users – meaning upsells and expansions outweigh lost revenue. This is a strong indicator of product value and customer satisfaction.

Conversion Rate

Traffic alone doesn’t drive revenue. Conversion rate measures the percentage of visitors who take a desired action, whether signing up for a free trial, booking a demo, or subscribing.

Understanding where users drop off in the funnel helps refine marketing efforts. Are users bouncing before trying the product? Is the pricing page unclear? Small tweaks based on conversion data can lead to significant improvements.

Average Revenue Per User (ARPU)

ARPU tracks how much revenue each customer generates on average. A rising ARPU indicates users are finding more value, upgrading plans, or using additional features.

SaaS companies often increase ARPU through tiered pricing, upselling, or value-based pricing strategies. Monitoring ARPU helps refine pricing models to maximize profitability.

Time to Value (TTV)

How quickly do customers see results after signing up? TTV measures the speed at which new users derive value from your product. The shorter the TTV, the more likely users are to engage and convert into paying customers.

For example, a project management SaaS with a complex onboarding process might struggle with retention. If users don’t experience immediate benefits, they may churn before fully adopting the tool. Optimising TTV ensures users reach their “aha” moment faster.

Tracking these KPIs isn’t about collecting numbers – it’s about making better business decisions. A SaaS business that understands its revenue drivers, customer behaviour, and growth levers has a strong foundation for scaling.

KPI Tracker simplifies this process, offering a free and easy way to monitor, share, and optimise performance metrics. Because when you have the right data, making the right decisions becomes second nature.