Key SaaS Metrics Every Founder Should Track

28 December 2025

Running a SaaS business is like sailing a ship through unpredictable waters. Some days, the wind is on your side, propelling you forward. Other days? You're battling storms, navigating treacherous currents, and wondering if you're even heading in the right direction.

But what if you had a compass? A set of guiding lights that tell you exactly where your company is going and what adjustments you need to make? That’s exactly what SaaS metrics do. They’re not just numbers on a dashboard; they tell the story of your business—where it’s thriving and where it’s gasping for air.

If you're a SaaS founder, you can't afford to make blind decisions. You need data-driven insights to steer your startup toward sustainable growth. So, let’s break down the key SaaS metrics every founder should track to navigate the turbulent waters of the subscription business.

1. Monthly Recurring Revenue (MRR) – Your Growth Pulse

MRR is the heartbeat of your SaaS startup. It represents the predictable revenue your business generates every month. Without it, you're flying blind, unsure of how much money will hit your bank account next month.

How to Calculate MRR?

MRR is simple to compute:

> MRR = Total Number of Active Customers × Average Revenue Per User (ARPU)

For example, if you have 100 customers paying $50 per month, your MRR is $5,000.

Why Does MRR Matter?

- Gives you a clear picture of revenue trends.
- Helps forecast future earnings and cash flow.
- Guides budgeting and financial planning.

Growing MRR consistently? That’s a sign you’re on the right track. If it’s flat or declining, it’s time to dig deeper and fix the leaks.

2. Customer Acquisition Cost (CAC) – What’s the Price of Growth?

Acquiring customers isn’t free—it takes marketing, sales efforts, and resources. But if your CAC is too high, you might be spending more than what you’re making.

How to Calculate CAC?

> CAC = Total Sales & Marketing Expenses ÷ Number of New Customers Acquired

For instance, if you spent $10,000 on marketing in a month and acquired 100 new customers, your CAC is $100 per customer.

Why Should You Track CAC?

- It helps determine if your customer acquisition strategy is sustainable.
- A high CAC with low revenue means you’re bleeding cash.
- SaaS startups must strike a balance between growth and profitability.

If your CAC keeps climbing, it's time to refine your marketing strategies, optimize ad spend, or improve conversion rates.

3. Customer Lifetime Value (CLV) – The Worth of a Customer

Would you pay $100 to acquire a customer who spends $500 over their lifetime with your company? Absolutely! That’s where CLV comes in—it tells you how much revenue an average customer brings before churning.

How to Calculate CLV?

> CLV = ARPU × Average Customer Lifespan

Say your ARPU is $50 per month, and a customer stays for 24 months, then:

> CLV = $50 × 24 = $1,200

Why is CLV Important?

- Helps you understand long-term revenue potential.
- Allows you to justify higher marketing spending if CLV outweighs CAC.
- Encourages customer success initiatives to increase retention.

A rising CLV signals a strong product-market fit, while a shrinking CLV means customers aren’t sticking around long enough.

4. Churn Rate – The Silent Business Killer

Churn is the percentage of customers who cancel their subscription over a period. High churn is like a bucket with a hole—no matter how much water (new customers) you pour in, you’re constantly leaking.

How to Calculate Churn Rate?

> Churn Rate = (Customers Lost ÷ Total Customers at Start of Period) × 100

Example: If you started with 1,000 customers and lost 50 in a month:

> Churn Rate = (50 ÷ 1,000) × 100 = 5%

Why is Churn Dangerous?

- It eats away your MRR and growth potential.
- High churn means you're not delivering enough value.
- The cost of acquiring a new customer is much higher than retaining one.

If your churn is consistently high, it’s time to improve onboarding, enhance product value, or offer better customer support.

5. Net Revenue Retention (NRR) – The Growth Multiplier

NRR measures how much revenue you're keeping and expanding from existing customers. It includes upgrades, downgrades, churn, and expansions.

How to Calculate NRR?

> NRR = [(Starting MRR + Expansion Revenue – Churn Revenue) ÷ Starting MRR] × 100

If you began with $50,000 MRR, gained $10,000 in upsells, and lost $5,000 to churn:

> NRR = [($50,000 + $10,000 – $5,000) ÷ $50,000] × 100 = 110%

Why is NRR a Power Metric?

- If NRR is over 100%, your business can grow even without new customers.
- Shows how well you're monetizing existing users.
- Indicates strong customer satisfaction and product value.

If your NRR is below 100%, focus on delivering more value through upsells, cross-sells, and retention strategies.

6. Gross Margin – Are You Actually Making Money?

MRR might look great, but what if your costs are eating up most of it? Gross Margin helps you understand what’s left after covering the direct costs of delivering your service.

How to Calculate Gross Margin?

> Gross Margin = [(Revenue – Cost of Goods Sold) ÷ Revenue] × 100

For instance, if your SaaS makes $100,000 in revenue, but hosting, support, and infrastructure cost you $30,000:

> Gross Margin = [($100,000 – $30,000) ÷ $100,000] × 100 = 70%

Why Gross Margin Matters?

- A high margin means more profitability and sustainability.
- Investors love companies with strong margins.
- Helps gauge cost efficiency in operations.

If your margins are shrinking, evaluate hosting costs, optimize software infrastructure, or streamline support operations.

7. Conversion Rate – Turning Visitors into Paying Users

Your marketing efforts bring traffic to your site, but how many actually convert into paying customers? A low conversion rate means you're losing potential revenue.

How to Calculate Conversion Rate?

> Conversion Rate = (Number of Conversions ÷ Total Visitors) × 100

If 5,000 people visit your pricing page and 250 sign up:

> Conversion Rate = (250 ÷ 5,000) × 100 = 5%

Why It’s Crucial?

- Helps optimize marketing spend.
- Pinpoints where prospects drop off in the funnel.
- Shows how effective your landing pages and CTAs are.

If your conversion rate is low, tweak landing pages, improve messaging, or offer stronger incentives.

Final Thoughts

As a SaaS founder, tracking these metrics isn’t just an option—it’s a necessity. They reveal your business's health, indicate warning signs, and guide strategic decisions. Like a skilled captain sailing the open sea, you need to keep an eye on every wave (metric) to reach your destination successfully.

Not every metric will scream for attention at the same time, but ignoring any of them can lead to a shipwreck. Keep measuring, keep optimizing, and most importantly—keep sailing forward.