7 Key Metrics & Vitals for SaaS

Working in e-commerce SaaS for nearly a decade has reinforced the importance of clearly defining a small set of key metrics. Setting them from the start gives everyone shared ownership, a common language, and a baseline for decision-making.

Like vital signs for the body, these business metrics indicate operational health. A healthy SaaS business isn’t just about revenue; it’s about strong foundations and early detection of issues before they become critical.

That said, overcomplicating metrics or tracking too many creates noise. In my experience, excessive metrics cause teams to lose sight of the big picture as they struggle to piece together what the data is saying. These are vanity metrics—avoid them.

Here are seven key metrics and vitals for SaaS that any small team can use to understand their product without getting lost in the noise.

MRR provides predictability and scalability. It is central to SaaS success. A decline signals immediate attention.

MRR = Σ (Monthly subscription revenue from all active customers)

Vitals to Monitor:

• MRR trend (growth, stability, decline)
• MRR composition:
  • New MRR: first-time recurring revenue from brand-new customers who start paying this period
  • Expansion MRR: increases from existing customers (upgrades, added seats, add-ons)
  • Contraction MRR: decreases from existing customers (downgrades, seat reductions, applied discounts)
  • Churned MRR: recurring revenue lost when customers cancel entirely
  • Net New MRR: New + Expansion − Contraction − Churn

Actions:

• Segment MRR by customer cohorts and plans
• Keep dashboards current and visualize trends
• Identify and pursue upsell and cross-sell opportunities

Excessive churn undermines growth and sustainability.

Customer Churn Rate = (Lost Customers in Period / Total Customers at Start of Period) × 100

Revenue Churn Rate  = (MRR Lost to Churn in Period / MRR at Start of Period) × 100

Vitals to Monitor:

• Customer churn rate
• Revenue churn rate

Actions:

• Analyze churn drivers via feedback and analytics
• Strengthen onboarding and customer support
• Deploy proactive retention (engagement, success outreach, loyalty)

Indicates long-term customer value and how much you can invest to acquire customers.

LTV = Average Revenue Per Account (ARPA) × Gross Margin × Customer Lifetime (months)

Customer Lifetime (months) = 1 ÷ Monthly Customer Churn Rate
               = 1 ÷ (1 − Monthly Retention Rate)
               = 12 ÷ Annual Customer Churn Rate

Gross Margin = (Revenue − Cost of Goods Sold) ÷ Revenue

Cost of Goods Sold (COGS) for SaaS product typically includes: hosting/infrastructure, third‑party APIs/services required to deliver the product, customer support tied to service delivery, data/storage/bandwidth, and sometimes payment processing fees. It excludes: sales & marketing, product/R&D, and general/administrative expenses.

Vitals to Monitor:

• LTV by customer segment
• LTV-to-CAC ratio (aim for 3:1 or higher)

Actions:

• Create expansion paths for existing customers
• Align pricing with delivered value
• Prioritize customer success to extend lifetime

Determines the sustainability of growth; a high CAC relative to LTV signals inefficiency.

CAC (blended)        = Total Sales & Marketing (S&M) Cost in Period ÷ New Customers Acquired in Period
CAC (by channel)     = Channel Cost in Period ÷ New Customers from Channel in Period

Customer Payback Period (months) = CAC ÷ Monthly Gross Profit per Customer
Monthly Gross Profit per Customer = ARPA × Gross Margin

“Fully loaded” S&M cost includes paid media, agencies/contractors, tools, salaries, benefits, commissions, programs.

Vitals to Monitor:

• CAC by marketing channel (fully loaded)
• Customer payback period (months to recover CAC on gross profit)

Actions:

• Optimize marketing mix and targeting
• Streamline sales processes
• Invest in organic growth (SEO, content, referrals)
• Compute CAC by channel and overall to compare efficiency.

Fast trial-to-paid conversion indicates clear product value; slow conversion suggests friction.

Vitals to Monitor:

• Conversion rate from trials to paid accounts
• User activation and key “aha” moments

Actions:

• Improve onboarding and guidance
• Identify and remove friction points
• Experiment with trial length and feature gating

Cash management directly impacts survival and sustainable growth.

Vitals to Monitor:

• Cash runway (months of remaining cash at current burn)
• Monthly cash inflow vs. outflow

Actions:

• Review and cut unnecessary expenses regularly
• Balance growth investments with cash sustainability
• Adjust pricing and margins to maintain healthy unit economics

Shows market fit and momentum; stagnant growth can indicate deeper issues.

Vitals to Monitor:

• Month-over-month MRR growth percentage
• Sources of growth (new, expansion, retention)

Actions:

• Focus on segments with high retention and expansion
• Test and refine growth strategies continuously
• Monitor cohort behavior to fine-tune offerings

• Create a Metrics Dashboard: Make metrics visible to the entire team.
• Set Clear Targets: Establish benchmarks to define success.
• Regular Reviews: Integrate metrics into monthly planning and retrospectives.
• Act Decisively: Use insights across product, marketing, and operations.
• Adapt Metrics Over Time: Reassess which metrics matter as you scale.

By treating these metrics as vital signs, your SaaS or e-commerce venture can proactively diagnose issues and build toward long-term success.