The world of SaaS metrics can be overwhelming, with numerous articles and countless individual metrics available, each with their own value in specific scenarios. It's easy to feel confused about which metrics are relevant to your business right now.
As someone who has founded and grown a product-led business from inception to 10,000 customers with month-to-month subscriptions averaging below $100 per month, I understand your challenges and will guide you through this process.
Consider the unique aspects of your business when determining which SaaS metrics to track and analyze. It's common to fall into the trap of calculating numerous metrics simply because someone suggested it, only to find yourself unsure of how to effectively use them.
Instead of getting caught up in the "what" of metrics, it's important to ask yourself "why." Each metric serves a purpose, but is that purpose truly relevant to your specific business?
Adopting a Business-First Approach
The approach I favour is to start with is the business itself, and the key questions that need to be answered in order to make informed decisions. By understanding the specific needs and goals of your business, you can then identify which metrics are most valuable in providing the insights you need. This approach ensures that the metrics you track are directly tied to addressing the unique challenges and opportunities of your business, rather than simply following a generic list of metrics.
To determine which metrics are most important for you, first define the stage of your SaaS business that you're currently in. This stage will have a significant impact on the types of metrics you should consider tracking in order to progress to the next stage.
Identifying Your SaaS Business Stage
SaaS businesses can be classified into several stages of growth, and the metrics that matter will vary depending on the stage.
Let's take a closer look at each stage:
Foundation ( Just Starting)
This stage includes businesses that are pre-revenue or have less than $100k in ARR or less than 100 customers.
At this stage each new customer is exciting, and you’ll be wanting to track when they’re signing up and to learn what you can about how they found you and how they are using your product.
Key business questions to ask include: Are people interested in what we're doing? Are they finding us? Are we solving the problem we're trying to solve? Will people pay to use our product?
Metrics such as customer sign-ups, customer acquisition channels, and customer usage patterns are important to track.
Early
This stage includes businesses with around 100 customers or $100k in ARR.
If you’ve found a hundred customers willing to pay for a subscription, you might be onto something. It’s time to think a bit more about pricing. Can you provide an upgrade path where customers pay higher amounts in line with the value that your product delivers?
Key business questions to ask include: Is our solution perceived to be valuable? Is our product sticky? Are people recommending our product? Is our target audience big enough? Do we have sufficient funding?
Metrics such as customer lifetime value (CLTV), customer acquisition cost (CAC), and pricing tiers are important to track.
Growth
This stage includes businesses with around 1,000 customers or $1M in ARR.
At this size your team headcount will be increasing, you have a big enough customer base for segmentation analysis to be meaningful, and your challenges will start to include efficiency of operations and customer acquisition in addition to maintaining growth.
Key business questions to ask include: Is our business viable? Are we growing fast enough? Where are we finding our customers? Which sales and marketing techniques are working best? Are our systems running smoothly?
Metrics such as churn rate, customer segmentation, and sales and marketing performance are important to track.
Scale Up
This stage includes businesses with around 10,000 customers or $10M in ARR.
At this scale, you’ll likely have data specialists within your team, and they’ll be working with you on business instrumentation and metrics to match your business priorities, which might be a focus on sales as your growth engine, or on retention initiatives, or on marketing campaign optimisation, or all of these.
Key business questions to ask include: Is our business valuable to potential investors? Are we meeting our retention goals? How satisfied are our customers? Are we on track to achieve our investor valuation targets?
Metrics such as customer retention rate, customer satisfaction (CSAT) scores, and investor valuation metrics are important to track.
Growing with Confidence
As your business grows, add in more metrics that start to become relevant.
Some are important early on but can't be accurately measured until you have a certain volume of customers. Some become important only as headcount increases and layers of management are introduced. Others such as MRR and subscription count you’ll want to start measuring as early as you can.
Key Takeaways
Continuously assess the relevance of your metrics as your business grows and evolves.
Prioritize metrics that provide actionable insights for your current stage.
Be prepared to introduce new metrics as your business reaches specific milestones or undergoes organizational changes.
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