Software-as-a-service (SaaS) is a massive, highly competitive market. However, it can also be incredibly lucrative; any business model that works on a subscription or retainer model makes good business sense. There are no peaks and troughs of selling individual, one-shot licences or upgrades, just relatively stable, sustained revenue. It’s no wonder it’s such a popular operational model.

However, SaaS success doesn’t happen on its own. Customers don’t just need to come in the door—they ideally need to stick around for as long as possible. Thankfully, there are many metrics that companies can track to evaluate their successes in marketing, sales, and after-sales support.

We’re a SaaS company and experts in sales data, so let’s combine that expertise. Using some of our favourite SaaS metrics below, you can make data your competitive advantage!

Leads by lifecycle stage

 Knowing where each of your leads is in your sales funnel is crucial. Whether you assign them a lead score, note their place in the “Attention > Consideration > Purchase” journey, or use labels like MQL (Marketing Qualified Lead) and SQL (Sales Qualified Lead)—or perhaps a mixture of all three—you need a system in place that evaluates each lead’s likelihood to buy.

With a system like this applied evenly and logically across your entire prospect database, you can establish how many leads occupy each part of your buying funnel. This useful exercise can help uncover potential bottlenecks in your marketing and sales processes.

Record this regularly to keep yourself aware of how readily prospects are flowing through your sales funnel and how that flow may be impacted by trends and seasonality.

Lead Velocity Rate (LVR)

Get your calculator out—here’s the first of our not-really-that-scary equations. Lead velocity rate is a metric expressed as a percentage value that helps you establish the rate of lead growth. In short, it lets you record and compare the number of leads you acquired during a given time period.

It’s calculated as follows:

(Current period's number of qualified leads – Last period’s number of qualified leads) ÷ Last period’s number of qualified leads x 100 = LVR

So, let’s say that last month, your sales team had 200 qualified leads in their pipeline, and they had 236 this month. You’d calculate:

(236 – 200) 200 = 0.18 x 100 = 18% Lead Velocity Rate

In short, you’re working out the percentage increase or decrease of leads from the previous period.

Lead-to-Customer Rate (LTC Rate)

This metric shows the percentage of leads you’re converting into customers, but as with many metrics on this list, the real value comes when you look beyond the numbers.

When you read between the lines, your lead-to-customer rate indicates how well you’re generating sales-ready prospects and how fit for purpose your lead generation and sales practices are.

It’s another relatively easy equation:

Total number of customers earned in a given period ÷ Total number of leads from that period x 100 = LTC Rate

So if you earned 6 customers in one month from a pool of 300 leads, you’d calculate:

6 300 = 0.02 100 – 2% Lead-to-Customer Rate

Tracking stats like these makes using a CRM platform invaluable.

Monthly Recurring Revenue (MRR)

This is an easy one—you can probably stop using the calculator for this metric. It’s simply the sum of your recurring SaaS revenue for a given month.

If you deal in yearly renewals, ARR (Annual Recurring Revenue) is also a valuable metric.

Average Revenue Per Account (ARPA)

This is a useful statistic, both from a sales and accounting perspective. It shows you the average revenue you are receiving per subscription and can help you understand how many users you need to maintain your financial needs and goals.

It’s also a useful sense-check to combine with a little competitor research—are your customers getting good value for money compared to other solutions on the market?

ARPA is calculated thusly:

Total revenue for a given period ÷ Total number of customers during same period = ARPA

Remember to include new and recurring subscribers and up- and cross-sells from that given period, in your revenue figure.

A short note on averages
Averages are good as a yardstick, but don’t consider them the be-all and end-all. A single outlier can cast an unrealistic spin on the data. However, it can be useful to “know your averages” as long as you always investigate when they deviate from the norm.

Customer Retention Rate (CRR)

This is an essential metric for any company operating on a subscription or retainer basis. CRR is a means of understanding how many of your customers have stuck with you over some time and is expressed as a percentage. It’s calculated as follows:

Number of users that continued to subscribe at the end of a set period ÷ Number of subscribed users at the start of a set period x 100 = CRR

It’s the percentage of users still with you (“retained” users) over the period in question.

As an example, let’s work out a 6-month CRR. Say you had 300 customers at the start of January, and 225 of that pool of customers are still with you as of the end of June. We’d work out:

225 ÷ 300 = 0.75 x 100 = 75% Customer Retention Rate

Customer Churn Rate

Your customer churn rate is effectively the opposite of your retention rate—it’s a percentage showing how many customers you’ve lost over some time.

Number of customers lost over a given period ÷ Total customers at the start of the period x 100 = Churn Rate

For example, say you had 400 customers at the start of the quarter but lost 20 by the time the quarter was over. You’d calculate:

20 ÷ 400 = 0.05% x 100 = 5% Churn Rate

It’s essential to track churn rates over time as they are there to identify how rapidly subscribers are leaving. A consistent rise in churn rates should trigger you to investigate why people are going elsewhere.

This is where those “we’re sorry to see you go” questionnaires come in handy. As people leave for other SaaS solutions, they have nothing to lose in telling you the truth; some responses can be brutally honest! If you don’t already use surveys like these, implement them immediately – rising churn rates or otherwise!

When you identify an increase in churn, it might also be wise to look at competitor offerings to see if a seasonal sale or new offering is drawing users away.

Customer Lifetime Value (CLV)

CLV is a metric that indicates the average total amount that customers spend with you during their subscription. By tracking this figure over time, you can get a broader picture of the financial impacts of customer churn/retention and a rough figure of how much you can expect to earn from a single customer – expressed as a monetary figure.

It helps if you’ve already worked out your ARPA, as we’ll be using it in our calculation:

(Annual or Monthly) ARPA x Average Customer Lifetime (in years or months) = CLV

It’s quite a simple equation. Say your annual ARPA is £100 per year and customers stick around for an average of 6 years, your CLV will be £100 x 6 = £600.

Customer Acquisition Cost (CAC)

Your CAC is the average cost required to acquire a new customer. Understandably, you want to bring in new customers at as low a cost as possible, so keeping a close eye on CAC is crucial. Your customer acquisition costs can also help you grasp the efficacy and cost-effectiveness of sales and marketing endeavours.

To calculate your CAC, you must work out your total marketing and sales spend over time. This can (and probably should) include staff wages and other operational overheads. You’d work out:

Total sales and marketing costs over a given time ÷ Number of new customers earned during that time = CAC

Revenue Growth Rate

This rate is expressed as a percentage that indicates revenue growth within a given period. It’s pretty easy to figure out:

(Current period’s sales revenue – Previous period’s sales revenue) ÷ Previous period’s sales revenue x 100 = Revenue Growth Rate

So, say you made £2,500 last month and £3,200 this month. You’d calculate:

(£3200 – £2500)/£2500 x 100 = 28% Growth Rate

Remember – all metrics are vanity metrics unless you dig deeper. Explore what factors have contributed to or hindered your growth. Are existing clients upgrading, or are new ones coming along? Always consider why that might be.

Also, consider churn and retention rates alongside your growth rate. How much of your customer base is made of new customers vs. existing subscribers? And how many tend to leave (churn)? For example, if customers are leaving you at an equal or higher rate than new ones are joining you, that’s a huge problem!

In the dynamic world of SaaS, success hinges on more than innovative solutions and smart marketing—it’s about understanding the intricacies of your business metrics. From lead generation to revenue growth, each statistic offers a window into your company’s health and direction.

By harnessing the power of metrics like Lead Velocity Rate, Customer Retention Rate, and Customer Lifetime Value, you can gauge your current performance and chart a course for future growth. Remember, behind every number lies a story—a tale of challenges conquered, and opportunities seized. So, as you delve into the realm of data-driven decision-making, you may find not just insights but also the keys to unlocking enduring success in the competitive landscape of SaaS.