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What is the single most effective metric for a SaaS business?

When it comes to the most effective SaaS metric there is no one magic number you can just look at. You need a framework of carefully selected KPIs.

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Originally posted on Quora.

There isn’t just one.

There’s no single magic number you can just look at and be calm that everything is going alright.

Let’s say you’re tracking churn and keeping it low, but your CAC is going up. Very soon you’ll be in deep trouble and worst of all, it’ll be too late before you know.

That doesn’t mean you need to look at a thousand different metrics either. That will just make you go mad.

Instead, I believe you should be looking at a small set of metrics, that give you a good overall picture of how your company is progressing:

  • MRR: It gives you a pulse on where you stand and how you’re growing.
  • Churn: The most obvious way to track whether you’re attracting the best customers and how happy they are with the solution you’re providing
  • CAC:LTV ratio: (This is a bit of a cheat because it’s really two metrics) This is the best way to measure your business model.

Of course, there are many other metrics you could (and should) be tracking, depending on the specifics of your business. But these 3 give you a reliable framework to always be in the know on what’s going on in your SaaS business.

P.S. If you need a little refresher on SaaS metrics, we have a handy cheat sheet with definitions and formulas for the most common ones.

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