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Metrics

Key Metrics Every B2B SaaS Company Should Track

Key Metrics Every B2B SaaS Company Should Track

Driving growth requires focusing on key metrics across the customer journey. Tracking the right metrics is crucial for success, from acquiring new customers to retaining existing ones and expanding revenue per customer.

Let's look at the three essential pipeline and growth metrics that investors in SaaS businesses care about most.

It's not enough to build these analytics for the business overall; rather, the data should also be filtered by market segments (e.g., what is the ACV for industry verticals? How about industry verticals in a particular region? Etc.) This way you can focus on the most valuable channels with the most valuable customers.

Acquisition Metrics

The first group of metrics focuses on customer acquisition. Key metrics to track include:

  • Qualified Lead Velocity Rate: This measures the monthly growth of Marketing Qualified Leads (MQLs) in your pipeline.
  • Lead Quality: A great way to measure lead quality is to multiply the win rate percentage by the Average Contract Value (ACV). Higher-quality leads result in better win rates and larger deals.
  • Discretionary Customer Acquisition Cost (CAC): Tracking the discretionary spend on acquiring new customers, excluding fixed costs like salaries, allows for short-term optimization of acquisition efforts.
  • CAC Recovery Time: Measuring how long it takes to recover the cost of acquiring a customer is essential for ensuring sustainable growth.
  • Win/Loss Ratio: Straightforward – the ratio of Closed (won) vs. Closed (lost)

Revenue Metrics

It's all about the money, after all

  • Average Contract Value (ACV): The average monetary value of a customer contract over a specified period, typically a year.
  • Monthly Recurring Revenue (MRR): The predictable total revenue generated from all active customer subscriptions in a given month.
  • Customer Lifetime Value (CLV): The total net profit a company expects to earn from an individual customer over the entire duration of their relationship with the business.
  • Revenue by Lead Source: A breakdown of the total revenue generated from customers acquired through different marketing channels or lead sources.

Retention Metrics

Retaining customers is just as important as acquiring new ones. Two key metrics to monitor are:

  • Logo Churn: Track the percentage of customers who leave after the initial onboarding period. Aim to minimize churn beyond this point to maintain a stable customer base.
  • Quick Ratio: This metric provides a holistic view of your company's growth efficiency. It describes the dollars of new revenue generated for every dollar lost. Calculate it by dividing (new MRR + expansion MRR) by (churned MRR + contraction MRR). A Quick Ratio of 4 is considered the minimum threshold for healthy SaaS companies, meaning that the company is generating $4 of new and expansion MRR for every $1 of lost MRR due to churn and contraction.

Expansion Metrics

Growing revenue from existing customers is a powerful driver of exponential growth. Key metrics to track include:

  • Annual Revenue Per Unit (ARPU) Growth: Measure the year-over-year increase in revenue per customer (or unit). Aim for at least 10% annual ARPU growth.
  • Engaged Advocates: Track the number of customers who actively refer others to your product or service. Engaged advocates are a strong indicator of customer satisfaction and a key growth driver.
  • Monthly Active Users (MAU): Monitor the number of unique users engaging with your product each month. Growing MAU indicates increasing adoption and value delivered to customers.

By focusing on these three groups of metrics - Acquisition, Retention, and Expansion - you gain a comprehensive view of their growth performance. Regularly tracking and optimizing these metrics will help you make data-driven decisions, identify areas for improvement, and ultimately drive the exponential growth that investors expect.