Essential SaaS Metrics

Through our work with dozens of software companies, we've observed that the metrics that matter shift dramatically as companies evolve from early-stage startups to mature enterprises. While many focus on standard metrics like MRR and CAC, our experience shows that successful companies adapt their measurement approach based on their growth stage. This guide shares our battle-tested framework for measuring and optimizing SaaS performance at every stage.

Beyond Basic Financial Tracking

Most software companies start with basic financial tracking - simple P&L statements and linear projections. During our work with early-stage companies, we consistently see that this approach falls short as companies scale. One of our portfolio companies learned this lesson the hard way, focusing solely on top-line revenue growth until they discovered their unit economics were unsustainable. Their CAC had grown to 24 months of customer revenue - far beyond sustainable levels.

The Metrics That Matter at Each Stage

Our experience working with companies from seed to exit has revealed distinct measurement priorities at each growth stage. Rather than tracking everything possible, successful companies focus on specific metrics that drive decision-making at their current stage.

Early Stage: Building the Foundation

In the earliest stages, we've found that companies succeed by focusing on four core metrics: Monthly Recurring Revenue (MRR), Customer Acquisition Cost (CAC), basic conversion rates, and initial customer lifetime value calculations. One of our portfolio companies grew from $0 to $1M ARR by obsessing over just these metrics, ignoring the temptation to track dozens of additional data points.

Growth Stage: Scaling with Precision

As companies enter their growth phase, measurement needs become more sophisticated. We've seen the most successful companies maintain a balanced focus across several key metrics rather than optimizing for any single measure. Through our work with growth-stage companies, we've found that maintaining a balanced scorecard of ARR, LTV:CAC ratio, and retention metrics provides the clearest picture of business health.

One of our portfolio companies increased their valuation by 3x by focusing specifically on net revenue retention, improving it from 100% to 130% over 18 months through systematic measurement and optimization.

Maturity Stage: Optimizing for Efficiency

At maturity, the focus shifts to efficiency and optimization. Our data shows that mature companies need deeper insights into recognized revenue, cash flow metrics, and customer cohort analysis. One enterprise software company in our portfolio improved their gross margins by 15 percentage points by implementing sophisticated customer segment analysis.

Deep Dive: The Metrics That Drive Growth

Revenue Metrics That Actually Matter

Monthly Recurring Revenue (MRR) remains the foundation of SaaS measurement, but our experience shows that breaking it down reveals the most actionable insights. We recommend tracking:

• New MRR from new customers
• Expansion MRR from existing customers
• Contraction MRR from downgrades
• Churned MRR from lost customers

Through our portfolio work, we've seen that companies who track these components separately spot problems and opportunities months before their competitors.

Customer Economics: The Truth About What Works

Our data across dozens of companies shows that successful SaaS businesses maintain specific ranges for key metrics:

• CAC payback periods under 12 months
• LTV:CAC ratio of at least 3:1
• Gross revenue retention above 90% for growth stage companies
• Net revenue retention above 120% for enterprise products

One of our portfolio companies turned around their business by focusing specifically on these metrics, improving their LTV:CAC ratio from 1.5:1 to 4:1 over 12 months.

The Real Story on Retention

Through our work with high-growth companies, we've found that retention metrics tell the most important story about business health. Our most successful portfolio companies maintain:

• 100% net retention for SMB-focused products
• 120% for enterprise products
• 140% for category leaders

Building a Metrics-Driven Culture

Success in SaaS requires more than just tracking metrics - it demands building a culture that uses data to drive decisions. We've seen companies struggle when they focus on measurement without action. Instead, the most successful companies in our portfolio:

• Make metrics visible and accessible to all teams
• Tie every metric to specific business objectives
• Use data to drive weekly decision-making
• Regularly review and adjust their measurement framework

Looking Forward

The companies that succeed in scaling don't just measure more - they measure smarter. Through our work with dozens of software companies, we've consistently seen that those who master their metrics outperform those who don't. The key isn't to track everything, but to focus on the metrics that matter most at your current stage of growth.

Remember: Start with the basics, build complexity as you grow, and always ensure your metrics drive actionable insights and better decision-making. In our experience, companies that embrace this approach consistently outperform those who chase vanity metrics or overcomplicate their measurement frameworks.

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