SaaS Metrics for Enterprise Software
Recently, I asked a couple of founders and a local M&A advisor for their views on the appropriate key metrics to track when you are an enterprise SaaS business. There may be some metrics that are missing, perfection is not what I am focused on, traction and momentum I am!
What are the key metrics for Enterprise SaaS companies to track over time?
What key metrics?
Mike Carden manages to these 5 key metrics:
LTV vs CAC
MRR & ARR
Read Mike’s thoughts https://www.linkedin.com/pulse/5-key-saas-benchmarks-start-ups-michael-carden/
Mike also is a big fan of Return on Capital Invested. The theory is that for each $ you raise, it should result in a 5x increase in enterprise value for the next round. As Mike says, “let that one sink in”.
What do investors look for?
Danny Tomsett shared some perspectives around what an investor looks for:
Customer acquisition growth rate
MRR net retention rate - high churn likely at early stage, however some clients growing is key
MRR growth rate
LTV or if too soon, average MRR per client.
Sales Efficiency (showing tracking improvement ideally)
CAC:Revenue ratio and/or gross margin.
Conversion rates across each stage Inbound/Outbound> MQL > SQL> Closed won
Product / Market Fit
Market segmentation data / buyer persona validation
Survey data - this method provides some key insights - https://coda.io/@rahulvohra/superhuman-product-market-fit-engine
Cash Burn rate
Days to zero
Mike and Danny also both have adopted OKRs for their teams with a focus mostly around Team, Engineering, Marketing, Sales, Product Health and Customer Advocacy.
What tools do people use for tracking?
So many different options, all use OKRs, to trail down the key metrics to everyone across the business, or One Metric (Rowan Simpson), others customise their CRM. I have also seen people work out the metrics and then just release them on a tool like Notion and let people iterate on the fly.
How do you position this with what is happening in the market for raising capital?
So I asked Mark Clare of Clare Capital to break it down a bit more. He shared several relevant presentations and documents:
Key Metrics for SaaS Companies - 2018 Southern SaaS conference on SaaS metrics.
How to Calculate SaaS Metrics – a useful two-page summary that can easily be circulated.
Confidential SaaS metrics benchmarking exercise for NZ SaaS businesses.
How fast is fast T2D3 - $2M in ARR then triple, triple, double, double, double
In my research I also found a couple of recent presentations from investors and avisors that are worth digging into: