Which SaaS Metrics Should You Track?

Are you tracking the right metrics to help your SaaS business grow?

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The pathway to predictable growth is anything but clear. To achieve sustainable scale, you need to focus on the right metrics. It all depends on the context of your business—its unique operations, industry, growth stage, and more.

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This checklist will help you filter 100+ potential metrics down to the 8-12 that drive sustainable and predictable SaaS business growth.

The SaaS Metrics Checklist: 5 Criteria for Evaluation

1. Strategic Alignment
2. Actionability
3. Predictive Power
4. Stage Relevance
5. Reliability

When you evaluate operational metrics with these key criteria, you ensure effectiveness and increase the likelihood of accelerated and sustained growth. Download a free plug-and-play grading rubric to evaluate your SaaS metrics.

1. Strategic Alignment

To start, put first things first. The metrics you prioritize must directly tie to core business objectives like growth, retention, or efficiency. If you focus on metrics that don’t align with your strategy, you’ll use your resources in the wrong places and fail to achieve key objectives.

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This criteria is mission critical. If a metric you’re considering doesn’t pass this litmus test, stop here and find one that does.

Strategic Metric Examples

1. Annual Recurring Revenue (ARR) growth directly measures the growth rate of the business, optimizing for scaling goals.
2. Net Revenue Retention (NRR) signals effective upselling and churn mitigation.
3. Revenue multipliers indicate growth and efficiency for profitability objectives.

Case Study: Slack’s North Star Engagement Metric

Slack uses "Number of Teams Actively Using Slack" as a north star metric. This measurement supports Slack's strategic goal of increasing engagement and adoption. It’s also reflective of the value teams get from Slack’s collaboration-enhancing features. 

2. Actionability

Can you influence the metric? The ability to influence what you measure is essential. The more control you have over actions that affect the outcome, the more effective the metric.  

Actionable Metric Examples

1. CAC Payback Period indicates sustainable acquisition spend, which is controllable via marketing spend adjustments.
2. Burn Multiple flags capital-efficient growth (e.g., $1M net new ARR per $1.5M burned), which can be influenced by revenue activities.
3. Feature Adoption Scores identify underused product areas needing UX improvements, which product and engineering teams can change directly.

Case Study: Zendesk’s Customer Satisfaction Metric

Zendesk employs Net Promoter Score (NPS) to gauge customer satisfaction. By monitoring the comments of both detractors and promoters, Zendesk can take immediate action to improve customer experience.

3. Predictive Power

Can you use the metric to predict outcomes? The metrics you prioritize should be leading indicators that forecast business performance. This will help you gauge what needs to be done to compound desired outcomes and avoid unwanted outcomes. It also helps to prioritize the initiatives most likely to affect these outcomes.

Example Prediction Metrics

1. CMGR (Customer Monthly Growth Rate) often correlates with faster ARR growth when paired with NRR.
2. Daily Active Users DAU and Monthly Active Users MAU numbers often telegraph higher retention rates.
3. LTM Free Cash Flow Rate helps assess a company's ability to generate cash, which is crucial for funding future operations.

Case Study: Docusign’s Predictive Engagement Metrics

DocuSign used analytics on engagement metrics to predict which premium features would drive upgrades for free users. This strategy resulted in a 5% uptick in freemium-to-paid conversion rates, a significant increase since they were seeing 130,000 new daily users.

4. Stage Relevance

Is the metric a good indicator for a growth-stage SaaS company? Context matters. Many metrics are best suited for a specific level of company maturity. Exercise caution with metrics adopted from larger or smaller scale companies; they may not be relevant to your business at its current stage. 

Example Growth Stage-Relevant Metrics

1. NRR signifies sustainability and scalability, both key elements for a growth-stage SaaS company. 
2. Gross Margin indicates profitability, which becomes more essential as your business scales.

Case Study: Buffer’s Stage-Relevant Metrics

Buffer, a growth stage SaaS company, prioritized Average Revenue Per User (ARPU), Churn Rate, and Customer Lifetime Value (CLTV). These metrics helped inform pricing and customer success strategies for sustainable growth. Since using these metrics, Buffer has doubled ARR to more than $20M.

5. Reliability

Is the metric reliable? Accurate data collection and transmission is critical for a metric’s success. You can assess metric reliability with consistency, accuracy, granularity, and verifiability. The more you can trust a metric, the better it will meet all of the other criteria in this list.

Making the SaaS Metric Cut

Leaders should prioritize metrics that meet at least a 3/5 majority of these criteria. For instance, Net Revenue Retention aligns with strategic retention goals (1), predicts growth (3), and remains critical across stages (4). Conversely, vanity metrics like total registered users often fail multiple tests because of low actionability and predictive value.

Analyzing SaaS Data with Machine Learning

Even with the right metrics in place, markets change rapidly and constantly. Your SaaS business needs to keep up. Machine learning models are evolving to automate data analysis. You can use this technology to adjust metric priorities based on dynamic variables like market conditions. It can also identify additional strategies for moving the needle on key metrics, just like an analyst would.
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Chief helps growth-stage SaaS companies access more quality insights from their operational data. Contact us to learn how we can help you optimize your operational SaaS metrics.