Get Software As A Service: A Primer On Saas Metrics & Benchmarks

Most Important Areas Your SaaS KPIs Should Cover Sales and revenue: Some examples of sales KPIs are customer lifetime value, monthly recurring revenue (MRR), and customer acquisition cost. They typically show you how potential customers are progressing through the sales funnel.

It should be noted that the Rule of 40 only applies to SaaS businesses. This is because software companies that leverage their services to other businesses are known to manage higher margins between 70% and 90%. However, this rule of thumb can still be applied as a useful benchmark for other subscription companies.

The Rule of 70 is a calculation that determines how many years it takes for an investment to double in value based on a constant rate of return. Investors use this metric to evaluate various investments, including mutual fund returns and the growth rate for a retirement portfolio.

Most Important Areas Your SaaS KPIs Should Cover Sales and revenue: Some examples of sales KPIs are customer lifetime value, monthly recurring revenue (MRR), and customer acquisition cost. They typically show you how potential customers are progressing through the sales funnel.

Monthly recurring revenue or MRR is often considered “the holy grail of all SaaS metrics,” and for good reason; it tells you a lot about the health of your business overall. MRR is a measurement of what's being brought in by month.

The Rule of 40—the principle that a software company's combined growth rate and profit margin should exceed 40%—has gained momentum as a high-level gauge of performance for software businesses in recent years, especially in the realms of venture capital and growth equity.

In recent years, the 40% rule has gained widespread usage as a popularized measure of growth by SaaS investors. The Rule of 40 states that if a company's revenue growth rate were to be added to its profit margin, the total should exceed 40%.

The rule of 40 formula requires just two inputs, growth and profit margin. To calculate this metric, you simply add your growth in percentage terms plus your profit margin. For example, if your revenue growth is 15% and your profit margin is 20%, your rule of 40 number is 35% (15 + 20) which is below the 40% target.

The 14 SaaS metrics that matter most Activation rate. Number of active users (NAU) Conversion rate. Churn rate. Monthly recurring revenue (MRR)/annual recurring revenue (ARR) Average revenue per account (ARPA) Customer acquisition cost (CAC) Customer lifetime value (CLV or LTV)