5 Essential SaaS Metrics You Must Measure

Step up your SaaS game

Essential saas metrics is so much more than convincing more people to become paying users. It’s also all about paying attention to the Key Performance Indicators (KPI), where you’ll find metrics that you can measure to track your overall SaaS business. 

The problem is that there are tons of different metrics, so it can be tough to know which ones matter most to you.

You might be asking, “But, I can track all those metrics at once, right?” 

Well, when you’re tracking dozens of SaaS metrics at once, it’s nearly impossible to focus on the most important trends and use them to drive your business forward. In other words, it’s just a waste of time and energy. 

It’s crucial to prioritize which SaaS marketing metrics matter to your business, so you can easily track how it is progressing and make informed decisions along the way.

That’s why we’ve put together this list of some crucial SaaS metrics you must measure. Don’t worry. This is not an exhaustive list but rather a good starting point for getting a handle on the metrics that are actually essential for you.

Why are SaaS metrics important?

Before we get into the nitty-gritty, it’s important to understand the reasons why you need to measure SaaS metrics in the first place.

For most SaaS business owners, steady growth in the future has always been an ultimate goal. After all, the entire customer lifecycle is so much more important than immediate sales, right?

It’s for this reason that SaaS metrics are put in place, serving as a guide to help your business navigate the path to long-term success. It helps you understand your sales, marketing, and customer success— the three things that are key to continuous growth.

Simply put, tracking SaaS metrics will help you answer the big questions, such as where your leads are coming from and if they’re converting. It gives insight into how many of them are upgrading or downgrading their plans.

More importantly, it tells you why these things happen— whether it’s a problem with lead generation, an issue in customer retention, or something else entirely.

5 key SaaS metrics you need to track

There are several important metrics to track, but the following five should be your absolute priority. 

Keep in mind that they will vary based on your specific business model and goals, which is why it’s crucial for you to customize them accordingly.

Metric #1: Activation rate

Activations are the first time someone uses your product in a way that shows they get value from it. 

This is where all those sign-ups convert into users and bring you revenue; you can see who ultimately invests in your product and make your business money. 

When you have an insight into who’s getting value from your product, you can quickly optimize the user experience for other customers; use an intuitive interface, provide customer onboarding videos, build an optimized email outreach, etc.

Also, activations can be a powerful metric to collect more qualified leads as it happens whether a customer has to pay for your product or not. For instance, you offer a trial freemium plan or free trial. They can still activate your product and you get their contact information.

Metric #2: Churn rate

Since most SaaS businesses rely on subscription services, customer churn rate is a top metric to track.

This metric shows you the measurement of users that drop your services within a given period of time. So, when the churn rate is high, there must be something wrong with your product. 

That’s why it’s safe to say that this metric helps you analyze how customers interact with your product, what makes them leave, and makes it much easier for you to form better retention strategies.

Metric #3: Customer lifetime value (CLV)

Customer lifetime value metric will help you understand the average value your customer brings to your business over an entire lifetime. The longer a customer continues to use your product, the greater your lifetime value will be.

It’s a useful metric because it helps you calculate what percentage of new customers is needed in order for companies to break even and generate profit. 

Therefore, with this metric, you can understand how much revenue you expect to receive in total in the future from your customers. That’s how you’ll be able to generate fresh ideas to constantly readjust your engagement strategies.

Metric #4: Average revenue per customer

The average revenue per customer helps you to understand how much a customer will contribute to your revenue during their relationship with you. You can use this metric in order to predict the potential lifetime value of a single customer depending on which stage they are at.

In other words, it’s one way of understanding if your customers have been converting from low-value purchases to high-value purchases, through strategies like cross-sells or up-sells.

If you can get a clear idea of the revenue generated by each customer, it would be much easier for you to understand the budget you need to allocate to secure and engage them.

Metric #5: Monthly active users

When you track your monthly active users, you can get a better idea of the overall health and reach of your SaaS.

The number can also be used to determine if an acquisition or marketing campaign you’ve implemented has been working because this metric will tell you how many people are actually using your product on a regular basis.  

Not to mention that monthly active users are also an insightful SaaS metric for demonstrating the value of your product to investors and potential buyers. 

Final thoughts

When it comes to the SaaS industry, there’s a lot to learn about your average customer, and the metrics above can track and reveal their journey with you. If all of those metrics are measured well, they can ultimately help build our total revenue and improve the bottom line.