Critical Metrics for SaaS Companies

Ali Rahimtula has a great post up titled Fundraise Like a Pro Using this Internal SaaS Metrics Playbook. As expected, Software-as-a-Service (SaaS) startups have a number of common financial characteristics that make it fairly straightforward to analyze how well the business is doing. At their core, SaaS companies are desirable due to the recurring revenue, high gross margin, and general predictability of the model. Each of these components is reflected in the metrics.

Here are some of the critical metrics for SaaS companies from the article:

  • MRR over time
    • Beginning of period MRR
    • + New customer MRR
    • + Existing customer expansion MRR
    • – Churned MRR
    • – Downgraded MRR
    • = End of period MRR
    • Growth
  • Customer counts
    • Customers add
    • Customers lost
    • End of period customers
  • Quick ratio
    • (new MRR + expansion MRR) / (cancelled MRR + downgraded MRR)
  • Churn
    • Gross MRR churn (inc. downgrades) ($)
    • Gross MRR churn / previous period MRR (%)
    • Logo churn (#)
    • Logo churn / previous period logo count (%)
    • Net MRR expansion (%)
    • Net MRR churn (%)
    • MRR retention (%)
    • Customer renewal rate (%)
    • Dollar renewal rate (%)
  • Cohort analysis
    • Average revenue per account
    • Price per seat
    • LTV
    • Conversion to paid rate
    • Average contract length
    • Months paid upfront
    • Engagement metrics
    • Customer conversion
    • Sales cycle time

SaaS entrepreneurs would do well to read Fundraise Like a Pro Using this Internal SaaS Metrics Playbook and get a more detailed understanding of their metrics.

What else? What are some other critical metrics for SaaS companies?

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