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SaaS Metrics
A living document of common SaaS Metrics definitions
SaaS Metrics
Metric
Definition
Notes
1
Customer Churn Rate
(Customer at the start of the period - Customers at the end of the period - New Customers Added during the period)/(Customers at the start of the period)
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2
Revenue Churn Rate
(Revenue at the start of the period - Revenue at the end of the period - New Revenue Added during the period)/(Revenue at the start of the period)
Churned Revenue → Churn, Cancellations, Non-Renewals, Contraction (Account Downgrades)
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3
Customer Lifetime Value(CLV)
Lifetime Value(LTV)
Customer lifetime rate = 1/(Customer Churn Rate)
Average Revenue Per Account(ARPA) = (Total Revenue)/(No. of Customers)
CLV = Customer Lifetime Rate x ARPA
CLV shows the average customer worth
CLV or LTV based on gross margin = ARPA x Gross Margin x Customer Lifetime Rate
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4
Customer Acquisition Cost (CAC)
(Among spent on sales and marketing) / (new customers added)
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5
Months to recover CAC
CAC Payback period
CAC / (MRR * Gross Margin)
measures the number of months it takes to generate enough revenue to cover the cost of acquiring a customer
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6
CLV: CAC Ratio
CLV/ CAC
business should have a CLV that is at least three times greater than its CAC. Any lower (say, a 1:1 ratio) and you're spending too much money. Any higher (a 5:1 ratio) and you're spending too little and probably missing out on business
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7
Leads by Lifecycle Stages Metrics
Lead: Lead generated by marketing
MQL: Lead qualified by marketing and sent to sales
SQL: Lead qualified accepted by sales
Opportunity: Lead shows probability of becoming customer
Customer: Lead has converted to customer
Lead to Customer: (Total no. of new customers in period)/(Total no. of leads in the period) *100
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8
Monthly Recurring Revenue (MRR)
Average Revenue per Account per month * No. of Accounts that month
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9
Expansion Revenue
Additional revenue from existing customers
Expansion Revenue → Upselling, Cross-Selling, Upgrades, Tier-Based Price Increases
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10
Net Promoter Score (NPS)
Net promoter score is used to measure customer satisfaction
NPS surveys asks customer to rate on on a scale of 0 to 10, how likely are you to recommend the product.
Detractors: 0-6
Passive: 7-8
Promoter: 9-10
NPS = % of Promoters - % of Detractors
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11
Net Revenue Retention (NRR)
(Starting MRR + Expansion MRR - Churned MRR)/(Starting MRR)
A SaaS company with an NRR in the ballpark of 100% is perceived positively; i.e. that the company is on the right track.
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