Web & SaaS
What is SaaS Metrics?
Definition
The key performance indicators for SaaS businesses — including MRR, ARR, churn rate, LTV, and CAC — used to measure health, growth, and unit economics.
In more detail
Core SaaS metrics: MRR (Monthly Recurring Revenue) — predictable monthly subscription revenue; ARR (Annual Recurring Revenue) — MRR × 12; Churn Rate — percentage of customers or revenue lost per month; LTV (Lifetime Value) — average total revenue per customer; CAC (Customer Acquisition Cost) — total spend to acquire one new customer.
The fundamental unit economics rule: LTV must be at least 3× CAC for a SaaS business to be viable at scale. If you're spending £300 to acquire a customer worth £250, you're losing money on every customer — no amount of growth will fix the underlying economics.
Net Revenue Retention (NRR) is the most important metric for growth-stage SaaS: NRR above 100% means existing customers are expanding (upsells, seat growth) faster than they're churning. NRR above 120% means you can grow revenue even if you stop acquiring new customers entirely.
Why it matters
Every product and architecture decision has downstream effects on SaaS metrics. Features that reduce churn, increase seat count, or enable upsells are worth building. Features that don't touch any metric are worth questioning. Understanding the numbers makes for better product decisions.
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