Top SAAS metrics

Metrics you need to know when analyzing a SAAS company

Anshil Bhansali, Jun 11, 2020

Here are some metrics you should be familiar when looking at an early stage Software-as-service company.

ARPU - Average Revenue per User. Calculated as: ARR or MRR/(number of customers).

Churn (rate) - This metric measures how much business is lost over a time period (usually monthly). This can be calculated as 'customer' or 'revenue' churn.

LTV (Customer lifetime value) - The amount of money customers pay during their engagement with the company. Calculated as: (1/churn rate)*ARPU.

CAC - Customer acquisition cost. All costs to acquire a new customer. Calculated by dividing all marketing/sales/on boarding expenses by total number of new customers, over a time period.

Payback period - Months to recover CAC. Calculated as: CAC/(ARPU*Gross margin)

CAC-to-LTV - The most important metric of them all. This tells you whether the business model is working or not. Calculated as LTV/CAC. The ideal range for this metric is 3-4. A value lowers means you're spending too much, and a value much higher means you're spending too less and probably missing out on business.

Am I missing something? Please let me know!