Don't get lost in space! Understanding SaaS metrics is no rocket science. We recently got a lot of user request to explain and detail critical SaaS metrics. Not only lifeless definitions but also how they're calculated, why they are useful and how they are connected to each other. This guide gives you a simple to understand introduction into SaaS metrics. So, we grouped them into three parts: acquisition, retention and revenue. And these are some of the metrics, we're going to introduce: Customer Acquisition Cost (CAC), User Churn, Retention Rate, Revenue Churn, Customer Liftime Value (LTV) and Monthly Recurring Revenue (MRR). Enjoy!

1. The 12 most critical SaaS
metrics everybody
should track
Simplify your SaaS analytics
with Strive!
http://striveanalytics.com/

2. What’s so different about SaaS metrics?
Revenue for all SaaS services comes over an extended period of
time.
Customers will stay for a long time, if they are happy with the
service. And the profit from that customer will increase.
Customers will churn fast, if they are unhappy with the service. The
business will lose money on the investment that they made to
acquire that customer.
à Next to acquiring the customer it is criticalto keep the customer.
SaaS metrics can be grouped into acquisition, retention
and revenue.

3. Visitors, Signup Conversion Rate
Customer Acquisition Cost
LTV : CAC ratio
Average Time per Session
Active Users
Retention Rate
Net Promoter Score
User Churn
Monthly Recurring Revenue
Revenue Churn
Average Revenue Per Customer
Customer Lifetime Value
Metric Types
1. Acquisition
2. Retention
3. Revenue

4. Visitor and Signup Conversion Rate
The rate at which visitors convert into paying customers.
Visitors are the number of people who come to your site. After a
person visits your site, a signup for trial or service traditionally will
be the next step.
1. Acquisition Metrics
Conversion rate =
"#$%&'(
)#(#*+,(
-.. "#$%&'(
0... )#(*+,(
= 15% Conversion Rate
3%-5% are average conversion rates for SaaS businesses.
Conversion metrics are often illustrated in a funnel.

5. Customer Acquisition Cost (CAC)
An estimate of the cost to acquire a customer. Marketing
expenses can include ad spendings, headcount etc.
You should start calculatingyour CAC once you have
reached a certain user scale.
The months to recover your CAC should be less than 12.
CAC =
"&? +@ (ABC( & ?A,EC*#%$ CF'C%(C(
G&?HC, +@ %CI J&(*+?C,(
1. Acquisition Metrics
$0..... CF'C%(C(
M. %CI J&(*+?C,(
= $500 CAC

6. LTV:CAC Ratio
An estimation of the value your company receives from each
customer in comparison to what you spent to acquire that customer.
Healthy SaaS businesses have a LTV : CAC ratio that is
higher than 3, sometimes as high as 8.
Viable SaaS businesses are able to recover their CAC in 5-7
months.
1. Acquisition Metrics
$1.500 LTV : $500 CAC = 3
LTV : CAC

7. Average Time Per Session/Average Session Per Day
The average duration of your customer using your service.
ATPS and ASPD are good leading indicatorsfor your
customer retention and user churn.
Average time per session =
P+*AB Q&,A*#+% +@ ABB (C((#+%(
G&?HC, +@ (C((#+%(
2. Engagement Metrics
0R ?#% *+*AB Q&,A*#+%
S (C((#+%(
= 3 min Average time per session
Average sessions per day =
G&?HC, +@ (C((#+%( I#*T#% *#?C@,A?C
G&?HC, +@ QAU( I#*T#% *#?C@,A?C
V. (C((#+%(
-. QAU(
= 1,6 Average sessions per day

8. Active Users
An active user is a user who uses your application in a certain
timeframe. Typically they are clustered in daily active users (DAU),
weekly active users (WAU) and monthly active users (MAU).
The best way to define an active user is to measure only the
events that create value. For example, a login alone does not
indicatethat the user achieved a desirableoutcome.
Valuableevents are specific to each product, so you need to
define them in the context of your own business.
2. Engagement Metrics
Daily active users = 500
Weekly active users = 1.000
Monthly active users = 2.500

9. Retention Rate
The rate at which customers return using your application.
An active user is a user who has triggered a key event. These events
are specific to each product.
You should track your retention rate in form of a cohort chart,
which compares similar groups of users over time.
Naturally tends to drop off really fast but should flatten out
over time. However, if it hits zero it is a strong signal you
need to improve your product.
Retention rate =
G&?HC, +@ AJ*#fC &(C,(
G&?HC, +@ *+*AB &(C,(
2. Engagement Metrics
0. AJ*#fC &(C,(
g. *+*AB &(C,(
= 33% Retention rate

10. Net Promoter Score (NPS)
The NPS is a customer loyality metric and an indicator for customer
happiness. The calculation is based on the single question:
„How likely is it that you would recommend our company to a friend
or colleague?“ The scoring is based on a 0 to 10 scale.
2. Engagement Metrics
NPS = % Promoters (9 and 10) - % Detractors (0 through 6)
40% Promoters - 15% Detractors = 25 NPS
If your organization’s NPS is higher than those of your
competitors, you will likely outperform the market.
You should actively engage with your detractors to reduce
their churn probability.

11. User Churn Rate
The rate at which your customers are cancelling their subscriptions.
Your monthly churn rate should never exceed 5% monthly.
An acceptable user churn rate is a 5%-7% range annually,
which equals 0.42%-0.58% monthly.
User churn rate = (
jA%JCBBCQ J&(*+?C,( I#*T#% *TC BA(* -. QAU(
kJ*#fC J&(*+?C,( -. QAU( A$+
) x 100
2. Engagement Metrics
(
V. JA%JCBBCQ J&(*+?C,( I#*T#% -. QAU(
V.. AJ*#fC J&(*+?C,( -. QAU( A$+
) x 100 = 10% User churn rate

12. Monthly Recurring Revenue (MRR)
Combined value of all paid subscriptions per month.
If customers are paying for more than one month up front you divide
amount paid for the subscription by the number of month of the
subscription period.
MRR = Total number of customer x
Average revenue per customer (ARPC)
You should exclude one-time payments and metered charges.
MRR is affected by your subscriptions, downgrades and
cancelations. Successful SaaS startups tend to grow their
MRR by 10—15% monthly.
3. Revenue Metrics
500 customers x $90 ARPC = $45.000 MRR

13. Revenue Churn Rate
Revenue churn is most basically defined as resources lost or the rate
of those resources lost in a given period of time.
If your Revenue Churn is high (above 2% per month) it is an
indicator that you have to take action. At 2% monthly churn,
you are losing about 22% of your revenue every year. That is
nearly a quarter of your revenue!
Revenue churn rate = (
uvv B+(* *+ Q+I%$,AQC(/JA%JCBA*#+%(
uvv -. QAU( A$+
) x 100
3. Revenue Metrics
(
$V.... uvv B+(*
$MV.... uvv -. QAU( A$+
) x 100 = 11,1% Revenue churn rate

14. Average Revenue Per Customer (ARPC)
The average MRR across your paying customers.
ARPC should not be less than 20$ per month. If users won’t
pay more, then you’re not solving a big enough problem or
aren’t solving it in a way that provides enough value… or you
just need a whole lot of users ;-)
ARPC =
PTC "xu +@ ABB U+&, J&(*+?C,(yuvv
G&?HC, +@ AJ*#fC J&(*+?C,(
3. Revenue Metrics
$45.000 sum of customersz
MRR
500 active customers
= $90 ARPC

15. Customer Lifetime Value (LTV)
The lifetime value of your customer is the total amount of money
you’re likely to make off a given customer over the life of their
account.
LTV is a prerequisite to calculateCAC and thus, tells you
what you can spend to acquire new customers.
Rule of thumb: your LTV should be at least 3 times higher
than your CAC.
LTV =
kv|j
x(C, JT&,%
3. Revenue Metrics
$}. kv|j
R.% x(C, jT&,%
= $900 LTV

16. Contact us
Strive gives you all these metrics automatically withalmost zero
configuration. No kidding.
hi@striveanalytics.com
striveanalytics.com
@striveanalytics