The 8 SaaS Metrics Every Founder Should Track
When you’re building a SaaS business, it’s tempting to track everything. Page views, trial signups, feature usage, NPS scores, support ticket volume. The list never ends. But tracking too many metrics is almost as dangerous as tracking none at all. You end up drowning in dashboards and losing sight of the numbers that actually drive decisions.
This guide covers the eight metrics that matter most for SaaS founders. These are the numbers investors ask about, the ones that reveal whether your business is healthy, and the ones that tell you where to focus next.
1. Monthly Recurring Revenue (MRR)
What it is: The total predictable revenue your business earns each month from active subscriptions.
Why it matters: MRR is the heartbeat of any subscription business. It tells you the size of your revenue engine right now, independent of one-time charges or usage spikes. More importantly, breaking MRR into its components (new MRR, expansion MRR, contraction MRR, and churned MRR) gives you a clear picture of what’s driving growth or dragging it down.
How to calculate it: Sum the monthly value of all active subscriptions. If a customer pays $1,200/year, their contribution is $100/month.
What good looks like: There’s no universal benchmark for absolute MRR, but healthy early-stage SaaS companies typically grow MRR by 10-20% month over month. Once you pass $1M ARR, 5-7% monthly growth is still strong.
2. Churn Rate
What it is: The percentage of customers (or revenue) you lose over a given period.
Why it matters: Churn is the silent killer of SaaS businesses. Even modest churn compounds quickly. A 5% monthly customer churn rate means you’re replacing more than half your customer base every year. That’s an enormous amount of effort just to stay flat.
How to calculate it:
- Customer churn: (Customers lost during period / Customers at start of period) x 100
- Revenue churn: (MRR lost during period / MRR at start of period) x 100
Revenue churn is generally more useful because it accounts for the fact that not all customers are equal.
What good looks like: For B2B SaaS, aim for under 5% annual revenue churn. For SMB-focused products, monthly churn under 3% is decent, though under 2% is where you want to be. Enterprise SaaS can achieve negative net revenue churn (more on that below).
3. Customer Lifetime Value (LTV)
What it is: The total revenue you can expect from a customer over the entire duration of their relationship with your product.
Why it matters: LTV tells you how much a customer is worth, which directly informs how much you can afford to spend acquiring them. It also reveals whether you have a real business or just a leaky bucket.
How to calculate it: The simplest formula is:
LTV = ARPU / Monthly churn rate
So if your average customer pays $50/month and your monthly churn rate is 2%, your LTV is $2,500.
What good looks like: LTV on its own isn’t that meaningful; it needs to be compared to your acquisition cost (see LTV:CAC ratio below). That said, LTV that’s consistently increasing over time is a strong signal that your product is getting stickier or your pricing is maturing.
4. Customer Acquisition Cost (CAC)
What it is: The total cost of acquiring a new paying customer, including marketing spend, sales salaries, tools, and overhead.
Why it matters: CAC tells you how efficiently your growth engine operates. A business that spends $500 to acquire a customer worth $5,000 is in a very different position than one spending $500 to acquire a customer worth $600.
How to calculate it:
CAC = Total sales and marketing spend / Number of new customers acquired
Be honest about what goes into this number. Include salaries, ad spend, content production, tools, and any other costs directly tied to acquisition.
What good looks like: CAC varies wildly by market segment. Self-serve SaaS products might have a CAC of $50-$200. Mid-market products with sales teams often see $5,000-$20,000. The absolute number matters less than the ratio to LTV.
5. LTV:CAC Ratio
What it is: The ratio of a customer’s lifetime value to the cost of acquiring them.
Why it matters: This is arguably the single most important efficiency metric for a SaaS business. It tells you whether your unit economics actually work. A ratio below 1:1 means you’re losing money on every customer. A ratio above 5:1 might mean you’re underinvesting in growth.
How to calculate it:
LTV:CAC = Customer Lifetime Value / Customer Acquisition Cost
What good looks like: The commonly cited benchmark is 3:1 or higher. Below 3:1, you may struggle to build a sustainable business. Above 5:1, you likely have room to invest more aggressively in acquisition.
6. Net Revenue Retention (NRR)
What it is: The percentage of revenue retained from existing customers over a period, including expansions, contractions, and churn.
Why it matters: NRR is the metric that separates good SaaS businesses from great ones. An NRR above 100% means your existing customers are spending more over time, even after accounting for cancellations. This is powerful because it means you can grow revenue even without acquiring a single new customer.
How to calculate it:
NRR = (Starting MRR + Expansion MRR - Contraction MRR - Churned MRR) / Starting MRR x 100
What good looks like: Top-performing SaaS companies achieve 120-140% NRR. Anything above 100% is a positive signal. Below 90% suggests you have a retention or expansion problem that needs attention before you scale acquisition.
7. Average Revenue Per User (ARPU)
What it is: The average monthly revenue generated per customer account.
Why it matters: ARPU tells you how effectively you’re monetizing your customer base. Tracking ARPU over time reveals whether you’re moving upmarket, whether pricing changes are working, and whether expansion revenue is materializing.
How to calculate it:
ARPU = Total MRR / Number of active customers
What good looks like: ARPU benchmarks depend entirely on your market. A developer tool might have a $20 ARPU while an enterprise platform sits at $5,000. What matters is the trend. Rising ARPU usually means your pricing and packaging are working. Falling ARPU might mean you’re attracting smaller customers or discounting too aggressively.
8. CAC Payback Period
What it is: The number of months it takes to recoup the cost of acquiring a customer.
Why it matters: Even if your LTV:CAC ratio looks healthy, a long payback period can create cash flow problems. If it takes 18 months to recover your acquisition cost but your average customer only sticks around for 14 months, you have a problem that LTV:CAC alone might not reveal.
How to calculate it:
Payback Period = CAC / (ARPU x Gross Margin %)
Including gross margin in the calculation gives you a more realistic picture, since not all revenue is profit.
What good looks like: For most SaaS businesses, a payback period under 12 months is healthy. Under 6 months is excellent. Anything over 18 months means you’re tying up a lot of capital in customer acquisition and may need to revisit pricing, reduce CAC, or improve activation.
Putting It All Together
These eight metrics don’t exist in isolation. They form a connected system:
- MRR tells you where you are
- Churn and NRR tell you how sticky your business is
- LTV, CAC, and LTV:CAC tell you whether your economics work
- ARPU tells you how well you’re monetizing
- Payback period tells you how quickly your investment returns
The challenge for most founders isn’t understanding these metrics. It’s actually calculating them reliably. If you’re running subscriptions through Stripe, tools like Subdash can pull these metrics directly from your billing data so you’re working with real numbers instead of spreadsheet estimates. Accurate data beats gut instinct every time.
Start Simple, Then Layer
If you’re early stage and overwhelmed, start with three: MRR, churn rate, and CAC. These give you the most actionable picture of your business health. As you grow and your operations become more complex, layer in LTV, NRR, ARPU, and payback period.
The founders who build durable SaaS businesses aren’t the ones tracking the most metrics. They’re the ones tracking the right metrics, understanding how they connect, and making decisions based on what the numbers actually say.