Did you know the SaaS industry is currently worth over $170 billion?

Mind = Blown 🤯

The industry also increased by 500% over the past seven years. 

In other words, it’s becoming harder to stand out in the incredibly competitive world of SaaS!

How do you ensure your SaaS company continues to survive and thrive?

Simple: By tracking crucial SaaS growth metrics. 

Growth metrics tell you if your SaaS company is growing sustainability over time. This growth rate data also shows you what processes require improvement and what’s currently working.

In this article, we’ll discuss 12 SaaS growth metrics to track and give you three actionable growth tips.

Let’s go!

Twelve Excellent SaaS Growth Metrics to Measure for Rapid Growth 

Here are 12 essential growth metrics every SaaS company should be tracking:

1. Customer Acquisition Cost

Customer acquisition cost (CAC) is the money spent on sales, marketing, and other expenses to acquire each new customer. It determines the effectiveness and scalability of your customer acquisition strategy. 

Consider offering free trials or freemium plans if your customer acquisition cost is too high. 

Wait, what —  offering your product for free can improve your customer acquisition cost?

Absolutely!

Free trials let a new customer discover your product’s value proposition independently – without much intervention from sales and marketing!

Learn more about How To Improve Free Trial to Paid Conversions.

How to calculate it:

2. Free Trial Conversion Rate

Your free trial conversion rate is the percentage of free users who found your product valuable enough to spend money on it. 

A high conversion rate indicates that you’ve got a solid onboarding and free trial strategy. 

Got a low conversion rate?

Maybe your free trial users feel like —

Additionally, some users might ditch the free version if the onboarding process is too complicated. As a product manager, you’ll need to offer the right free features and reduce friction to boost conversion rates.

How to calculate it:

3. Customer Lifetime Value

Customer lifetime value (CLV) is the total money a customer is expected to spend on your SaaS company throughout the business relationship. The longer you retain customers, the higher their lifetime value. 

Your customer success and support teams can boost lifetime value by providing proactive support. 

Does this mean you need to channel your inner Jedi and read your customers’ thoughts? 💭

Not exactly. 

Instead, you can rely on product usage data provided by Toplyne’s powerful integrations to learn where users are experiencing the most friction. Then, you can swoop in and offer a proactive solution! 🦸

This customer satisfaction metric can also help you discover your SaaS company's most valuable customer segments.

Pro tip: If your acquisition cost is much higher than your customer lifetime value it usually indicates a lack of sustainable revenue growth as you’re not generating enough profit from each customer. 

How to calculate it:

4. Customer Effort Score

Customer effort score (CES) is a customer satisfaction metric that measures how easy it is for customers to interact with your SaaS business. 

This includes resolving issues, signing up, making payments, and more. 

A smooth customer experience (CX) and a low CES could be the difference between a happy customer…and this:

How to calculate it:

Ask customers to agree or disagree with the following:

“X company made it easy for me to handle Y issue.”

Customers can choose from seven answers ranging from strongly disagree (score 1) to strongly agree (score 7). 

5. Activation Rate

This is one of the most important product metrics showing the percentage of users who reach your product’s “Aha!” moment. This SaaS metric is crucial for product-led companies since they rely on the product to drive adoption and boost customer success. 

Learn more about the Benefits of Product-Led Growth.

If your activation rate is low, you need to figure out what’s making customers say “nah-ah!” instead of “aha!” 

Tip: Encourage your product manager to create an onboarding strategy that shortens users' time to realize your product’s value. 

How to calculate it:

6. The Number of Active Users

The number of active users metric highlights those finding value in your product. These users are also ideal candidates for upselling. 

This SaaS metric can also help you spot inactive paying customers who might churn. 

You can target them with re-engagement marketing campaigns to make them fall in love with your product again!

Did you know that Toplyne can help you spot active and inactive users? 

You can even use the tool to launch unique go-to-market campaigns to get those users to convert!

How to calculate it:

7. Net Promoter Score

Wouldn’t you love it if your product had tons of hardcore fans?

That’s precisely what the Net Promoter Score (NPS) tells you. 

Net Promoter Score helps you discover your product’s promoters (your fans and Stans), so you can target them with upselling strategies to boost your product’s growth rate and revenue. 

But what can you do with your product’s detractors — the doubting Debbies and negative Nellies? 

Follow up with them via email to find out how the product failed their expectations and devise ways to boost customer satisfaction. 

Keep your fans close and your detractors closer 😉. 

How to calculate it:

Ask customers: 

“How likely are you to recommend us to a friend or colleague?”

Based on the rating customers give, you can classify them into:

• Promoters: Responded with 9-10.

• Passives: Responded with 7-8.

• Detractors: Responded with 0-6.

8. Monthly Recurring Revenue and Annual Recurring Revenue

Monthly recurring revenue (MRR) is the revenue you can expect every month, while annual recurring revenue (ARR) is the revenue you can expect in a year. 

Both these metrics showcase your SaaS company’s health and revenue growth potential, helping you make informed business decisions. 

How to calculate it:

Here are other net MRR metrics to consider:

• Net MRR Growth Rate: Net MRR growth rate tracks how your MRR increases or decreases every month. A substantial increase = vacay 🏝. A drop =  back to work 😞

• Net MRR Churn Rate: Net MRR churn rate is the percentage of total MRR lost from existing subscriptions. 

• Net New MRR: Net New MRR tracks the MRR gained from new customers.

• Expansion MRR rate: Expansion MRR rate tracks the percentage of additional MRR you generate from already existing customers only.

9. Renewal Rate

The renewal rate is the percentage of users who renew their contract once their subscription expires. Tracking renewal rates help you predict your MRR, CLV, and future growth rate prospects. 

And, of course, what’s more flattering than someone saying ‘yes’ again and again. 💕

How to calculate it:

10. Customer Churn Rate

Customer churn rate is the percentage of customers who opt out of your product over a particular period. 

While SaaS churn tracking isn’t useful for early-stage startups, established SaaS companies use it to learn why customers have churned and prevent others from taking the wrong churn. 🛣️

How to calculate customer churn:

11. Revenue Churn Rate

The revenue churn rate measures the income your SaaS company loses over a specific period (usually monthly)

Note: you can also track the gross MRR churn rate to monitor the percentage of recurring revenue lost monthly.

This SaaS churn metric is a more accurate indicator of your SaaS company’s health than customer churn.

Why?

Look at it this way:

Let’s imagine that you lose 500 freemium users within a month.

The impact on your bottom line?

Minimal. 

While you lost out on potential revenue, you didn’t lose out on any actual paying customers. 

But imagine if you lost 500 paid users that contributed 25% of your monthly recurring revenue in a month.

Yeah, definitely more difficult to stomach. 🤢

SaaS companies experience high revenue churn rates due to customer downgrades, lost annual contracts, frozen accounts, and more. 

Keep checking the average revenue temperature each quarter. 🌡️

How to calculate it:

12. Expansion Revenue

Expansion revenue is a metric established SaaS companies use to track the additional revenue they get from existing customers. 

A high expansion revenue indicates that you’ve got fantastic upselling and cross-selling strategies. 

Additionally, there aren’t any substantial customer acquisition costs associated with expansion revenue.

In other words, your SaaS product grows itself!

How to calculate it:

Three Actionable Tips for Scalable Growth 

Here are three handy tips for effective SaaS growth: 

1. Don’t Focus On Metrics Like MRR Right from the Get-Go

As an early-stage startup, there’s no need to focus on traditional metrics like monthly recurring revenue and customer lifetime value. 

‍

Yep, that’s right!

You won’t have enough accurate data to track such product metrics.

For example, your early-stage product won’t have any monthly recurring revenue or enough customers to map out life cycles!

Instead, focus on collecting data and measuring smaller objectives like the number of free trial signups. 

2. Learn Which Sources Generate the Most High-Quality Leads

Pop quiz: Should you prioritize the lead source that generated the most leads or the source that drove fewer but more promising leads?

Option number 2 is definitely the winner!

Think we’re bonkers?

Look at it like this:
Imagine that you have a landing page generating a record number of leads. Great!

But none of them converts. 

So, how successful was the campaign? 

Many SaaS companies make the mistake of ignoring lead sources in favor of total leads. When evaluating your lead generation sources, analyze how those leads performed throughout the customer lifecycle. This way, you can measure their ROI and distribute your resources accordingly.

3. Focus on the Right Leads

Did you know that 90% of marketing-qualified leads (MQLs) never turn into sales-qualified leads (SQLs)? 🤯

It’s because these leads were identified as MQLs way too early on. 

Remember, MQLs are leads who interact with some form of marketing material. This means they only need to complete basic actions like visiting your site or downloading content to be considered a lead. 

MQLs rarely convert into SQLs (people who are ready to talk to sales) because they’re not prepared to do business with you. 

To save your team’s time and money on chasing leads that’ll never convert, shift your focus to product-qualified leads (PQLs). 

Not only do PQLs save you money, but they also give you crucial insights into product usage and buyer intent.

What are PQLs?

PQLs are leads who have already experienced your product’s value through a free trial or plan. As a result, they’re more likely to convert and less likely to churn. 

But how do you identify your PQLs?

Say howdy to Toplyne! 👋🤠

Toplyne is an intuitive SaaS platform that enables product-led companies to focus on high-intent leads.

Here’s how companies like Canva and Vercel generate sales pipeline from their self-serve funnel using Toplyne:

• Step 1/7: Create monetization playbooks to surface conversion and expansion opportunities (leads most likely to convert to paying customers, and teams most likely to grow into larger teams)

• Step 2/7: Choose the right leads to target – users (individual users) or accounts (a group of users with an organization).

• Step 3/7: Select the frequency at which you would want leads synced in your GTM apps.

• Step 4/7: Define how many leads you want by either the number of leads or your expected win rate, depending on your sales capacity and GTM strategy.

• Step 5/7: Build custom segments - Build custom segments based on And/Or logic at the deepest level of sub-properties within your product analytics.

• Step 6/7: Validate your GTM strategy - Hold back some users as a control group to test your GTM strategy.

• Step 7/7: Sync your product qualified pipeline into your GTM destinations - CRMs, sales & marketing execution tools, and customer engagement platforms.

It’s Always Smooth Scaling with Toplyne! ⛵

Let’s face it. The number of apps in the market isn’t going down anytime soon. 

It’s crucial — now more than ever —  that your SaaS business grows sustainably.

And to spot serious performance issues and growth opportunities, you must track the right SaaS growth metrics. 

Your companion on this journey of sustainable revenue growth?

Toplyne!

Why not sign up for free today and watch your SaaS company scale like never before?