Most common SaaS KPIs

Here I have listed a glossary of some common financial KPIs that SaaS companies often focus on:

1. Monthly Recurring Revenue (MRR): MRR represents the predictable and recurring revenue generated from subscriptions on a monthly basis. It's a fundamental metric for SaaS companies and provides insight into revenue trends and stability.
2. Annual Recurring Revenue (ARR): ARR is the annualized version of MRR and provides a longer-term view of revenue generation. It's calculated by multiplying MRR by 12.
3. Customer Lifetime Value (CLTV or LTV): CLTV measures the total revenue a customer is expected to generate over the entire relationship with the company. It helps in assessing the long-term profitability of acquiring and retaining customers.
4. Customer Acquisition Cost (CAC): CAC measures the cost incurred to acquire a new customer, including sales and marketing expenses. It's crucial for understanding the efficiency of the company's sales and marketing efforts.
5. CAC Payback Period: This metric represents the time it takes for a company to recoup its customer acquisition costs. A shorter payback period indicates a quicker return on investment from acquiring new customers.
6. Gross Margin: Gross margin measures the profitability of a company's core revenue-generating activities. For SaaS companies, it typically reflects the difference between revenue and the direct costs associated with providing the service, such as hosting and customer support.
7. Churn Rate: Churn rate measures the percentage of customers who cancel their subscriptions within a specific period. It's a critical metric for SaaS companies as it directly impacts revenue and growth.
8. Net Revenue Retention (NRR): NRR calculates the revenue retained from existing customers after accounting for churn, upgrades, and downgrades. A NRR greater than 100% indicates that upsells and expansions from existing customers are outpacing revenue lost from churn.
9. Burn Rate: Burn rate measures how quickly a company is spending its available cash. For SaaS startups, monitoring burn rate is crucial to ensure sustainable growth without running out of funds.
10. Cash Conversion Cycle (CCC): CCC measures the time it takes for a company to convert its investments in products and services back into cash flow. Optimizing CCC can improve cash flow management and overall financial health.