Top 11 SaaS Metrics with Benchmarks to Improve Performance

Top 11 SaaS Metrics with Benchmarks to Improve Performance


Confronted with ever-increasing levels of competition, it’s more important than ever for SaaS startups to meticulously track their business performance.

Monitoring key metrics such as churn rate, lifetime value, and customer-acquisition costs will help determine your business's growth rate, boost customer satisfaction, and drive a shared purpose across your organization, not to mention staying ahead of any indications of trouble. 

Many metrics, however, should not be measured on their own but assessed against other similar-sized SaaS businesses operating in the same space for a full context.

The 4 Reasons Why Measuring Metrics with SaaS Benchmarks Matters

SaaS metrics lay the groundwork for any successful SaaS company growth strategy, so keeping an eye on them makes perfect business sense. Here are the top four reasons you need to consistently measure them at regular intervals:

Every SaaS business needs to keep in touch with how their organization and industry evolve. Measuring and capitalizing on these crucial metrics allows you to easily track changes, ensures high growth and provides a clear view of risks and opportunities.

With an in-depth understanding of the critical metrics to measure your business's success, you can develop a model that supports swift growth and long-term profitability. 

Monitoring these metrics is crucial in measuring your progress and determining whether you will likely meet your goals. If you're not hitting the mark, your metrics will guide you to critical focus areas to avoid any disasters.

While targets set too low will hinder your business from achieving its full potential, those that are unrealistically high will probably negatively impact team morale. By using appropriate industry benchmarks, you can set ambitious but attainable targets, as well as make key decisions.

When faced with a seemingly endless list of metrics, you must be particularly discerning when deciding which to track. To help get you started, we've compiled a list of the top metrics to monitor and measure.

Meet PayPro Global.
Your Dedicated eCommerce Partner.

Thrive with the industry’s most innovative all-in-one SaaS & Digital Goods solution. From high-performing payment and analytics tools to complete tax management, as well as subscription & billing handling, PayPro Global is ready to scale your SaaS.

 

Sell your SaaS globally with PayPro Global!

 

11 SaaS Metrics with Benchmarks 

1. Customer Acquisition Costs (CAC)

CAC measures the cost of acquiring new customers against sales and marketing spending and how long it will take you to recoup that investment. Calculating CAC is an important task as it helps to determine the economic viability of your business and whether you need to adjust your sales and customer acquisition cost. Read our complete CAC calculation guide to better understand this essential SaaS metric.

Calculating CAC:

CAC = (sales costs + marketing costs) / new customers

CAC will vary depending on your industry, the growth stage of your business, and your customer segment. To give you some perspective - for an eCommerce business, it can range from $21 to $533. For a B2B SaaS business, the average CAC is roughly $200

Customer Acquisition Costs (CAC) formula

2. Lifetime Value (LTV)

LTV is a key SaaS metric that helps analyze how much income, on average, your customers contribute to your business throughout their relationship with you. To measure LTV, you'll need to have your churn rate or average revenue per user (ARPU) metrics on hand, both of which will be considered in more detail later. 

Calculating LTV:

LTV = ARPU × customer lifetime

or 

LTV = ARPU / user churn

LTV helps determine how much you should spend to acquire new customers. You aim to ensure your LTV is more significant than your CAC because, obviously you don't want to spend more money acquiring customers than the overall value they bring to your business.

The benchmark for a good LTV: CAC ratio is 3:1, in other words, to ensure your business remains profitable, LTV should be 3 times higher than acquisition costs.

3. Average Revenue Per User (ARPU)

Calculating your ARPU will help you evaluate your growth by determining how much revenue each of your subscribers generates over a given period. This is an especially beneficial metric for SaaS businesses that allow subscriber upgrades and feature add-ons.

Calculating ARPU:

ARPU = total revenue during a specific period/number of active users during that same period

As with CAC, there is no standard benchmark for ARPU as it varies broadly depending on location, industry, customer segment, and pricing model. So, it’s not particularly relevant to look at other businesses. 

However, the ARPU of your business is a significant indicator of your success in product development and sales and marketing efficiency.

4. Churn Rate

Determining your customer or revenue churn rate will help you gauge the strength of your current business model. Most notably, whether customers value your product or service if it’s priced right and if you're catering to the appropriate customer segments.

A high rate of customers that unsubscribe, downgrade their plans, or don't renew can seriously impact your recurring revenue and, therefore, your growth plans. Retaining your existing customers while acquiring new ones should be a top priority, so keeping track of your churn rate is a good way to monitor the flow of your buyers.

Calculating churn rate:

Customer churn rate (%) = (number of customers lost in a period / total number of customers at the start of period) X 100

and 

Revenue churn rate (%) = (monthly recurring revenue lost in last 30 days / monthly recurring revenue 30 days ago) X100

Churn Rate formula

Well-established, mature SaaS businesses should aim for an annual churn rate of 5-7%. While early-stage startups and those targeting small to mid-size businesses should expect a monthly churn rate of roughly 5%, which they’ll want to aim to improve over time.

5. Customer Retention Rate (CRR)

Measuring your CRR helps determine whether your current business strategy works, providing insight into how your customers relate to your product or service. Specifically, CRR refers to the percentage of customers who opt to renew their contract with you over a given period.

Knowing your retention rate allows you to better plan future revenue spend, and it also helps raise the alarm about low customer satisfaction and the need to boost loyalty if necessary. A high CRR, on the other hand, means your business is doing well, and you have a satisfied and engaged user base.

Calculating CRR:

CRR = (number of customers at the end of the period – number of new customers during the period) / number of customers at the beginning of the period) X 100

Customer Retention Rate (CRR) formula

For a SaaS business, a CRR of 35% or more is considered good. However, be sure to also consider average industry-specific rates.

6. Customer Satisfaction Score (CSAT)

To determine whether your customers are satisfied with your business, your products or services, or any other aspect of the customer journey, you should closely monitor your CSAT. You'll be able to identify areas within your business that need improvement and areas where you excel in your customer relationships.

It’s widely understood that happy customers lead to brand loyalty and repeat business, as well as positive reviews and referrals, so focusing on this metric ensures you don't lose out on any potential recurring revenue.

You can measure this metric through a generic CSAT survey, or you could opt to hone in on specific customer touchpoints such as billing, support, product features, sales interactions, and so on.

Calculating CSAT:

CSAT (for Likert scale questions) = (number of satisfied customers/number of survey responses) X 100

CSAT (for binary questions) = (number of “yes” responses / total number of responses) X 100

Customer Satisfaction Score (CSAT) formula

In order to understand further, you should know that a great CSAT score is considered to be above 80%.

7. Time to Value (TTV)

TTV refers to the time it takes for new customers to gain value from the product or service they have paid for. It's essential to monitor this metric carefully, as it could be the difference between loyal, happy customers who renew their business with you and customers leaving you for your competition.

One approach would be to take a general approach to measure overall TTV. Depending on your SaaS offering, you could measure areas such as time to onboard customers, time to upgrade, time to new feature adoption, and anything else you feel is relevant to your business plans. 

Calculating TTV:

TTV = date of product/service selection date – date of initial value realization

Time to Value (TTV) formula

There aren’t any clear benchmarks for TTV, but be sure to compare your TTV with that of your competition. The lower it is, the better for your business. 

8. Natural Rate of Growth (NRG)

This metric measures any growth independent of your sales and marketing strategy. It focuses on product- or service-led growth that's completely organic, and that's based on your company's value proposition for customers. The benefits of a good NRG include loyal customers and a lower CAC.

To calculate your NRG, you'll need to know your annual growth rate, the percentage of organic product/service customer signups, and the percentage of annual recurring revenue that originates from users who’ve already started using the product, i.e., via a free trial, free product, or freemium version.

Calculating NRG:

NRG = (annual ARR growth rate) X (% organic signups) X (% ARR from products) X 100

Natural Rate of Growth (NRG) formula

The benchmark for NRG is dependent on your ARR. A company with between $1 million and $10 million ARR should aim for +50% NRG, while a company earning between $10 million and $50 million ARR should aim for +30%. Those earning over $50 million ARR should aim for +15% NRG.

9. Lead Velocity Rate (LVR)

LVR is a marketing metric that measures month-over-month growth in qualified leads and can help determine whether you're likely to meet your end-of-quarter or end-of-year growth and revenue goals. It helps establish whether your marketing efforts are working and allows you to strategize and set future targets that drive lead generation. 

Calculating LVR:

LVR % = (number of qualified leads in the current month – number of qualified leads in the prior month) / number of qualified leads in the prior month) X 100

Lead Velocity Rate (LVR) formula

A forward-looking metric, LVR can help you assess and set internal benchmarks and predict and plan for future growth.

10. Monthly Recurring Revenue (MRR)

This is a powerful SaaS metric to track your business's growth momentum. MRR measures your monthly revenue flow based on new sales, upsells, and renewed business. With a clear sight of your predictable monthly revenue, you can also strategize your short-term growth path.

As a crucial part of reporting for investor-backed companies, MRR can be measured as a whole or broken down into segments such as new business MRR and churned MRR for more in-depth insight into the overall health of your business. To get a better understanding of this metric, read our MRR guide.

Calculating MRR growth rate:

MRR = ARPU X number of subscribers

MRR growth rate (%) = (MRR of month B – MRR of month A) / MRR of month A) X 100

Monthly Recurring Revenue (MRR) formula

The MRR growth-rate benchmark you aim for should be based on the growth stage of your business. Startups should aim for 15-20%, but SaaS companies, in general, should have a 10-15% MRR growth rate.

11. Annual Recurring Revenue (ARR)

Like MRR, ARR tracks revenue flow from new sales, renewals, and upsells, however, with a long-term outlook on opportunities and growth potential. Understanding your ARR is necessary to properly assess your company's financial health and then make the necessary budgetary adjustments. It's also critical in forecasting revenue and cash flow as well as for attracting potential investors.

Calculating ARR:

ARR = revenue from yearly subscriptions + expansion revenue (from add-ons, upgrades) - revenue lost due to churning

ARR growth YoY % = (current ARR - ARR over previous 12 months) / ARR over previous 12 months) X 100

Annual Recurring Revenue (ARR) formula

You’ll want to benchmark your ARR growth rate against companies at a similar growth stage to gauge what you should be aiming for. Companies with an ARR less than $1 million should show an average of 68% YoY ARR growth, while companies with ARR between $3-$5 million should show an average of 35% growth.

5 Ways of Improving Your SaaS Results

1. Improve Your CAC with Product Analytics

High-spend customers engaged and satisfied with your product are one of your most valuable sources of revenue. Using analytics to determine the top sources for these customers will help you adjust your marketing budget accordingly to recoup your marketing investment faster.

2. Maintain a High CSAT Score with Seamless Onboarding

Ensuring a high-quality onboarding experience should always be a top priority, as it can directly impact your CSAT score and your CRR. Be sure to create a personalized user experience that tracks essential milestones as well as easy-to-follow multimedia and in-app elements that guide users through the process.

3. Boost MRR Through Upsells

In-app prompts motivate users to purchase upgrades, and these additional features can help boost revenue. Pop-ups work well to achieve this, highlighting the benefits of more feature-rich plans and packages. Timing is critical when it comes to upsells, so make sure you're not constantly disrupting users' workflow. Driving upsells will help improve CAC, reduce churn, and improve your MRR growth rate.

Meet PayPro Global.
Your Dedicated eCommerce Partner.

Thrive with the industry’s most innovative all-in-one SaaS & Digital Goods solution. From high-performing payment and analytics tools to complete tax management, as well as subscription & billing handling, PayPro Global is ready to scale your SaaS.

 

Sell your SaaS globally with PayPro Global!

4. Reduce Churn With a Self-Service Support System

Most customers across industries prefer self-service and will usually attempt to troubleshoot any issues themselves before reaching out for live assistance. This also applies to SaaS businesses, with round-the-clock access to a self-service support system key to keeping customers happy. This could mean a simple FAQ section or a more complex multimedia knowledge base with best-practice tips.

5. Use The Freemium Model to Improve Conversion Rates

Lastly, provide a free trial of your product or a free basic plan with restricted features, allowing customers to test your offering before they commit to it. This will help you secure more product-qualified leads that could ultimately boost your customer conversion rate and recurring revenue.

How Can PayPro Global Help?

Packed with all relevant revenue growth tools, PayPro Global offers its users robust reporting and analytics to ensure SaaS companies, regardless of their growth stage, can have a macro and micro view of your business in real time. 

With access to relevant information, SaaS developers can check and adapt their marketing strategy based on live data. You can verify the performance of your ongoing campaign and optimize them to ensure the best results. Plus, by making use of historical data, you can create personalized campaigns, ensuring increased sales in new markets.

Closing Thoughts on SaaS Metrics and Improving Your Performance

Measuring the right metrics will help you benchmark your performance against your competition, determine where your company is in its development plan, and adjust your growth path as needed.

Partnering with an expert in SaaS metrics and business intelligence is a great way to elevate your strategy in identifying factors to facilitate rapid growth for your company. With PayPro Global, you can monitor the health of your business and react swiftly to customer and market trends. 

Visit PayPro Global or reach out to discuss how we can help you stay on top of your SaaS sales and overall performance. We would love to hear from you and see how we can work together to take your business to the next level.

The most significant cause of churn is when customers are not receiving enough value from the product or service to justify the expense.

Infrequent login or usage, requests for refunds due to changes in billing, dissatisfaction with product updates, and lack of loyalty benefits--all are sure signs that customers are unhappy.

 
Bloggers
Meir Amzallag

Co-founder and CEO of PayPro Global

Ioana Grigorescu

Content Marketing Manager at PayPro Global

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