1. Qualified Leads
2. Lead Velocity Rate
3. Conversion Rate
4. Leads to Opportunities
5. Opportunities to Closed Won Deals
6. Customer Acquisition Cost
7. Average Revenue Per User
8. Monthly Recurring Revenue
9. Annual Recurring Revenue
10. Closed Business to Project
11. Projects to Revenue
12. Revenue Retention
13. Customer Lifetime Value
14. Customer Churn Rate
15. Customer Retention Rate
16. Monthly Revenue Per Product
SaaS key performance indicators (SaaS KPIs) are measurable metrics that track a company's progress against its objectives (for example, actual sales against target quotas).
The subscription-based business model used by nearly all SaaS companies requires closely monitoring a core set of KPIs to track both new business and retention, which are equal contributors to SaaS growth.
Without knowing and tracking these KPIs, SaaS companies are left operating on assumptions and strategizing without accurate knowledge about where they should focus their time, budget and other resources.
Further, companies need a centralized, comprehensive financial planning solution to maximize the strategic impact of data tracking and analysis. Kristina Bittorf, Senior Manager of Finance at Sprout Social, put it aptly when she shared her experience implementing Vena at her company:
"Tackling the important questions gets a heck of a lot harder when you don't have a strong data foundation. The decisions about where to spend our money, where to invest and how to grow the business just weren't being made fast enough, said Kristina. In a dynamic SaaS environment like ours, you need to constantly analyze profitability and look at new metrics to influence your growth decisions".
In this article, we'll look closely at 16 of the most important SaaS KPIs to measure, why they matter, and how the right financial planning solution can enhance your ability to track these and other important metrics.
Not all leads are created equal. Your pipeline is healthiest when you don't just generate a high volume of leads, but ones that fit your ideal customer profile and have real intent to make a purchase.
Thats why many companies use the number of qualified leads generated during a specific time period as a key benchmark to measure the effectiveness of their marketing and sales efforts. If the majority of your leads are marketing qualified, you can be confident your marketing outreach is effective.
Further, you can measure marketing qualified lead (MQL) to sales qualified lead (SQL) conversion rate to track how successful your team is moving new leads down the pipeline.
The formula is simple. Divide your total number of MQLs by the total number of SQLs, then multiply by 100 (as shown below).
Lead velocity rate (LVR) measures the growth of the number of leads entering your pipeline over time. Its an important SaaS KPI that indicates both the health of your pipeline and your overall company growth potential.
It's calculated by subtracting the previous months number of qualified leads from this months number of qualified leads, then dividing the difference by the previous months number of leads multiplied by 100.
Conversion rate is a general SaaS KPI that can be used at every stage of the marketing and sales pipeline. It can measure the conversion of website visitors to inquiries, inquiries to leads and leads to customers (these are just a few examples).
Conversion rates are important because they indicate that the efforts you are putting forth prior to the conversion marketing campaigns, for instance, or specific sales tactics are working effectively. Conversion rate is measured by taking the total number of conversions and dividing it by the total number of visitors (or inquiries, or leads, etc.), then multiplying the quotient by 100.
Another SaaS KPI you can track to monitor pipeline management is lead to opportunity conversion rate. By definition, a lead is any sales prospect in your pipeline, while an opportunity is a specific deal being pursued by your sales team.
Understanding the rate at which leads turn into opportunities after becoming sales qualified helps you monitor the effectiveness of your sales process and proactively address any gaps that may exist at this stage of the pipeline.
Closed won deals are the final stage of your pipeline when a prospect signs a contract to officially become a customer of your business. You can monitor this key metric by calculating deal conversion rate or the total number of opportunities that become closed won deals.
Deal conversion rate is calculated by dividing the total number of closed won deals in a given time period by the total number of opportunities, then multiplying by 100.
Customer acquisition cost (CAC) measures the financial cost of acquiring a new customer. It considers marketing, sales and any other expenses directly related to generating leads and converting them to completed sales. This Vena Marketing Campaign Report Template lets you track ad spend across platforms to view CAC metrics such as cost-per-lead (CPL), marketing qualified leads (MQLs), return on ad spend (ROAS) and more.
SaaS companies use CAC to determine if they're investing the right resources into customer acquisition and optimizing them to increase profitability and overall ROI. Its calculated by adding the total of all acquisition-related costs, then dividing the sum by the total number of customers acquired.
To further assess how efficient your customer acquisition efforts are, you can use the SaaS magic number. It looks at your company's change in revenue quarter over quarter in relation to what it spent on marketing and sales activities.
Average revenue per user (ARPU) also referred to as average revenue per account (ARPA) is a measure of the mean amount of revenue earned from a single customer. You'll remember it as one of the key values used to measure CLV. SaaS companies also use ARPA as a way to measure the profitability of various subscription models and levels.
As a result, finance, marketing and sales teams can focus on the products, packages and customer segments that will bring in the most revenue for your company.
ARPU is calculated by taking the total amount of revenue generated by a particular product or subscription package and dividing it by the number of users that purchased it.
Monthly recurring revenue (MRR) measures the amount of revenue a company expects to earn each month. Its one of the most important SaaS KPIs to measure because it directly aligns with the foundation of subscription-based business models predictable, repeatable revenue.
MRR provides insight about seasonality and other month- or quarter-specific trends. It can be calculated as shown above, by taking your ARPU and multiplying it by your total number of active accounts that month.
This value can then be averaged by dividing it by the number of months you are including in your measurement. Its important to look for major fluctuations, especially repeated MRR variances at a particular time of year.
You can also plan for whats ahead with this free Revenue Projection Template for Excel.
Annual recurring revenue (ARR) is similar to MRR, except it measures recurring revenue by the year rather than the month. While MRR provides insight on month- and quarter-specific trends, ARR provides a longer lens view about revenue health over time.
ARR can be calculated by adding all of your MRR values for a single year, then averaging the yearly totals over time.
Closed business to project measures the rate at which newly won customers launch new projects with your services team and the time it takes for them to do so. This metric along with other business acceleration metrics (projects to revenue and revenue to revenue retention) covered in the next sections provide insight into performance at every stage of the post-sales process.
During forecasting, your teams can then use these core metrics to evaluate performance at each stage and optimize resource allocation for better results.
At the same time, you'll be better able to quickly identify and eliminate critical gaps in your processes that may impact the customer experience.
To measure your closed business to project rate, you'll need to calculate:
Measuring project to revenue involves calculating the number of projects your services team is working on that become revenue generating for your business and their average revenue velocity. You can do this by calculating:
These KPIs are helpful for measuring the profitability of your post-sale services over time and your average revenue for a given length of time, as well as executing more accurate forecasting and financial planning.
Revenue retention is the amount of revenue you retain after accounting for revenue churn during a given time period. For SaaS companies, measuring revenue to revenue retention, or your total incoming revenue versus the amount you retain after churn/losses, can give you a picture of your company's financial health and growth potential.
For SaaS companies, which focus heavily on sustainable growth through their subscription business models, this insight is invaluable.
Calculate your net revenue retention by starting with your MRR, subtracting all contracted and churned MRR, adding expansion and new revenue, then dividing the total by your starting MRR and multiplying by 100. Aim to understand how much new incoming revenue you need to generate to maintain your target revenue retention rate to drive growth.
Customer lifetime value (CLV) measures the total revenue a company expects to earn from a single customer over the entirety of their business relationship. Because of the heavy focus for SaaS companies on customer retention through renewed subscriptions, CLV is an especially valuable KPI to measure accurately.
To measure it, you need to know two things:
To calculate CLV, you multiply the two values.
Most companies measure CAC and CLV alongside each other for a better idea of overall profitability. Generally, a CLV:CAC ratio of three or higher is considered healthy (i.e. you are earning significantly more from your customers than youre investing to acquire them).
Churn rate measures the rate at which customers cancel subscriptions. Its an essential SaaS KPI for understanding how effectively you're serving your current customers.
Some churn, of course, is inevitable industry estimates say an acceptable SaaS churn rate lands somewhere between 57%. But companies must pay attention to their churn rate to maintain as low a percentage as possible, and of course watch for any unexpected increase suggesting a product or service issue that could negatively impact growth.
Churn rate is calculated by dividing the number of lost customers during a given time period by the number of customers at the start of that period, then multiplying by 100.
Retention rate is the opposite side of the coin to churn rate it measures the rate at which customers renew or choose to stay with your company.
Its calculated by subtracting the number of newly acquired customers during a given time period from the total number of customers at the end of the period, dividing the difference by the number of customers at the start of that time period and multiplying by 100.
As with churn rate, monitoring your retention rate is important to understanding growth potential and driving higher revenue through customer retention efforts.
Monthly revenue per product is a key way you can break down your overall revenue totals per-product (or product group) to inform decisions about marketing and sales resource allocation and product development, among other important decisions.
To calculate it, simply use the same formula you would for MRR, but calculate it by specific product group rather than for your entire portfolio of offerings.
For SaaS companies, KPI tracking is about more than performance assessment it's a means for more informed decisions, smarter planning and resilient, growth-focused operations.
SaaS KPI dashboards are one of the most effective ways to facilitate these capabilities, and theyre easily achievable using a centralized financial planning solution such as Vena.
Financial planning software solutions provide comprehensive overviews of your important financial data on a single interface, helping to contextualize it with visualizations, drive shared understanding, and enable a holistic, real-time view of organizational performance.
Ricardo Trigueros, Sr. Financial Analyst with Vena client Lookout, recently shared how Vena has transformed his (and his teams) ability to perform meaningful financial analyses and drive strategic action for their organization.
Prior to adopting Vena, Lookouts financial planning processes were piecemeal. As Ricardo put it: Lots of manual spreadsheets. Lots of heavy lifting. It was painful, disjointed and just not very efficient.
Now, they plan and forecast with confidence. According to Ricardo:
I love how quickly we can iterate now and model any unique revenue scenario we can think of Vena really resonated with me as a finance professional right from the start because any modeling I can do in Excel, I can do even better and faster in Vena.
Give your financial reporting processes a boost with these eight financial planning templates for Excel, designed especially for SaaS companies.
Download your free SaaS Revenue Planning Dashboard template from Vena today.
