Top 11 SaaS Metrics with Benchmarks to Enhance Performance in 2023

As a SaaS company, it's essential to track and analyze key metrics to ensure that your business is on the right track. In this blog, we'll be discussing the top 11 SaaS metrics that you should be monitoring and providing benchmarks to help you understand how your business stacks up against others in the industry.

1. Customer Acquisition Costs (CAC)

The CAC compares your sales and marketing expenses to the cost of obtaining new customers and calculates how long it will take you to make back your investment. It's crucial to calculate CAC since it can help you assess your company's economic viability and decide whether you need to change your sales and customer acquisition costs.

Calculating CAC:

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

The CAC will differ based on your sector of business, stage of business growth, and customer group. To give you some context, it can range from $21 to $533 for an eCommerce firm. The typical CAC for a B2B SaaS company is about $200.

2. Lifetime Value (LTV)

LTV is a crucial SaaS indicator that aids in determining how much money, on average, each of your customers generates for your company over the course of their dealings with you. You'll need your churn rate or average revenue per user (ARPU) metrics, both of which will be discussed in greater detail later, in order to calculate LTV.

Calculating LTV:

LTV = ARPU × customer lifetime

or

LTV = ARPU / user churn

LTV aids in calculating how much money should be spent on customer acquisition. You seek to ensure your LTV is more significant than your CAC because, obviously you don't want to spend more money acquiring clients than the entire value they offer to your firm.

The ideal LTV: CAC ratio is 3:1, meaning that your LTV should be three times higher than your acquisition expenses in order for your organization to remain successful.

3. Average Revenue Per User (ARPU)

By calculating your ARPU, you may assess your progress by figuring out how much money each of your subscribers brings in over a specific time frame. This measure is particularly useful for SaaS companies that provide subscriber upgrades and feature add-ons.

Calculating ARPU:

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

Similar to CAC, ARPU lacks a common benchmark because it greatly varies by region, industry, consumer category, and pricing model. Therefore, it is not particularly pertinent to consider other companies.

The ARPU of your company is a crucial predictor of your effectiveness in terms of product development, sales, and marketing, though.

4. Churn Rate

You can assess the viability of your present company strategy by figuring out your customer or revenue turnover rate. Most importantly, whether your product or service is valued by customers depends on how reasonably priced it is and which customer categories you are targeting.

Your recurring revenue and, thus, your growth objectives, might be significantly impacted by a high number of customers that cancel, downgrade, or don't renew. Keeping track of your churn rate is a smart approach to maintain tabs on the flow of your consumers since keeping your current customers happy while obtaining new ones should be your top goal.

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

The annual turnover rate for mature, well-established SaaS companies should be between 5 and 7%. Early-stage startups and those aiming to work with small to midsize organizations should anticipate a monthly churn rate of about 5%, which they'll want to work on reducing over time.

5. Customer Retention Rate (CRR)

By giving you information on how your consumers interact with your product or service, measuring your CRR can help you assess the effectiveness of your present business plan. CRR specifically refers to the proportion of clients that choose to extend their contract with you over a specific time frame.

Knowing your retention rate helps you make better financial plans for the future, alerts you to low client satisfaction, and, if necessary, highlights the need to increase customer loyalty. On the other hand, a high CRR indicates that business is booming and that your customer base is happy and active.

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

A CRR of 35% or higher is seen as favorable for a SaaS company. Be sure to additionally take average industry-specific rates into account, though.

6. Customer Satisfaction Score (CSAT)

You should carefully monitor your CSAT to ascertain whether your consumers are happy with your company, your goods or services, or any other component of the customer journey. You'll be able to pinpoint areas of your company that require development as well as those where your customer relationships shine.

Focusing on this measure ensures you don't miss out on any possible recurring revenue because it is commonly known that satisfied consumers lead to brand loyalty, repeat business, favorable reviews, and referrals.

This metric can be assessed via a general CSAT survey, or you can focus on particular customer touchpoints like 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

You should be aware that a fantastic CSAT score is considered to be above 80% in order to increase your understanding.

7. Time to Value (TTV)

TTV is the length of time it takes for new consumers to realize the benefits of the good or service they have purchased. It's crucial to keep a close eye on this indicator because it could mean the difference between having repeat business from satisfied, devoted consumers and losing them to your rivals.

One strategy would be to quantify overall TTV in a broad sense. Depending on your SaaS product, you may track things like how long it takes for customers to sign up, how long it takes to upgrade, how long it takes for new features to be adopted, and anything else you think is important for your business objectives.

Calculating TTV:

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

Although there are no precise standards for TTV, it is important to evaluate it against that of your rivals. The better for your company, the lower it should be.

8. Natural Rate of Growth (NRG)

This indicator gauges any growth irrespective of your marketing and sales plans. It focuses on organic product- or service-led growth that is driven by the value your business offers to clients. Loyal consumers and a lower CAC are two advantages of a strong NRG.

You need to know your yearly growth rate, the proportion of organic product/service customer signups, and the percentage of annual recurring revenue that comes from customers who have already begun using the product, such as through a free trial, free product, or freemium version, in order to calculate your NRG.

Calculating NRG:

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

Your ARR determines the standard for NRG. Aim for +50% NRG if your company's ARR is between $1 million and $10 million, and for +30% if your ARR is between $10 million and $50 million. Aim for +15% NRG if your ARR is over $50 million.

9. Lead Velocity Rate (LVR)

LVR is a marketing indicator that analyzes qualified lead growth month over month. It may be used to assess your likelihood of achieving revenue and growth targets for the end of the quarter or the end of the year. It enables you to strategize and define future goals that promote lead creation, as well as determine whether your marketing efforts are effective.

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

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 effective SaaS indicator may be used to monitor the growth trajectory of your company. Your monthly revenue flow, which is based on new sales, upsells, and renewed business, is measured by MRR. You can plan your short-term growth route if you have a clear view of your predictable monthly revenue.

MRR may be quantified as a whole or broken down into categories like new business MRR and churned MRR for more in-depth insight into the overall health of your business. MRR is an essential component of reporting for investor-backed enterprises. Check out our MRR guide for more information to better grasp this measure.

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

The MRR growth-rate benchmark you choose should take your company's stage of expansion into account. Startups should strive for growth rates of 15-20%, whereas SaaS firms should generally see MRR growth rates of 10-15%.

11. Annual Recurring Revenue (ARR)

ARR monitors revenue flow from new sales, renewals, and upsells similarly to MRR, but with a longer-term perspective on prospects and growth possibilities. To accurately measure the financial health of your business and subsequently make the required budgetary modifications, you must understand your ARR. It is essential for enticing potential investors as well as for predicting revenue and cash flow.

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

To determine what you should be shooting for, compare your ARR growth rate to that of businesses in comparable development stages. Companies with an ARR of less than $1 million should have average YoY ARR growth of 68%, whilst those with an ARR of $3 to $5 million should experience average YoY growth of 35%.

We hope this blog has provided valuable insights on the key SaaS metrics you should be monitoring and benchmarking in 2023. By staying on top of these metrics, you'll be able to identify areas of improvement and make data-driven decisions to enhance the performance of your business. As always, we recommend regularly reviewing and updating your metrics to ensure that they align with your business goals and objectives. Thanks for reading!