Key SaaS metrics every founder should know
SaaS businesses live and die by their metrics. Investors will ask about these numbers in every pitch meeting, and tracking them helps you make better decisions about growth, pricing, and spending.
The formulas
ARR = MRR x 12
ARPU = MRR / number of customers
Customer churn rate = churned customers / total customers x 100
LTV = ARPU x average customer lifespan
CAC = total sales and marketing spend / new customers
LTV:CAC ratio = LTV / CAC
These formulas are simplified versions. In practice, you may want to account for expansion revenue, downgrades, and cohort-specific behavior. But these basics give you a solid starting point.
What good looks like
- LTV:CAC ratio: 3x or higher is healthy. Below 1x means you lose money on every customer.
- Monthly customer churn: Under 5% is solid for SMB SaaS. Enterprise SaaS should aim for under 2%.
- CAC payback period: Under 12 months is strong. Over 18 months suggests unit economics need work.
Tips for improving your metrics
- Track these monthly. Trends matter more than absolute numbers.
- Reduce churn before increasing acquisition spend. Fixing a leaky bucket comes first.
- Increase ARPU through upsells and pricing optimization rather than just acquiring more customers.
- Compare your metrics against stage-appropriate benchmarks, not unicorn outliers.