The Metrics That Actually Matter in SaaS (And Why They’re Easier to Track Than You Think)
People often debate whether a company is sales driven or product driven. After working with two fast growing SaaS teams, I have learned that the companies that scale the healthiest are not built around a single function. They are built around a shared understanding of a small set of core business metrics.
These metrics are not complicated. They are not buried in huge dashboards. And they are all very trackable if you have the right foundation in place.
It Starts With Good Records
The biggest mistake I see early teams make is failing to keep clean, simple records of their customers. If your data is not clean, none of the metrics below will be reliable.
Two foundations matter most.
1. A clear ARR waterfall.
This is the backbone of SaaS visibility. It shows new ARR, churned ARR, contraction, expansion, and net change. Without it, you are flying without instruments. If you do not have one already, I have templates I am happy to share. Just send me a message on LinkedIn.
2. Solid financials.
Clean monthly closes. Accurate COGS. Proper revenue recognition. Without good books, gross margin and CAC payback will be guesses instead of metrics you can operate on.
When these two foundations are in place, everything else becomes easier to measure and easier to manage.
Breaking Down the Core Metrics
Below are the metrics I have consistently found most useful for alignment, planning, and decision-making.
ARR and Growth
At the end of the day, ARR and growth are what really matter. Every company is measured by its ability to grow.
If you are not growing, the rest does not matter. If you are growing, the next question becomes whether that growth is healthy.
Here are typical benchmarks for strong SaaS performance.
ARR Growth: 25% to 100%+ depending on stage
Logo and Revenue Retention: 90%+
Gross Margin: 80%+
NRR: Over 100%, ideally closer to 120%
Net Revenue Retention (NRR)
If growth is the headline, NRR is the story underneath it.
Acquirers and investors pay multiples based on NRR because it reflects two things: your ability to keep customers and your ability to expand them.
NRR is driven by churn and upsell. If you want a higher valuation multiple, you need this engine to be working well.
Gross Margin
Gross margin in software is usually not an issue. When it is, something fundamental is off.
Low gross margin typically means one of three things:
You are undercharging
The product is not delivering enough value
Support and delivery costs are too high relative to pricing
Gross margin exposes flaws quickly and is one of the cleanest indicators that something in the business model needs attention.
CAC Payback
CAC payback tells you if your go to market strategy works on a commercial level. You can have an incredible product, but if it costs too much to acquire customers, the business will not scale.
General benchmarks:
SMB focused companies: 12 months or less
Enterprise focused companies: Up to 18 months if retention is strong
Healthy CAC payback keeps customer acquisition from turning into a treadmill that burns cash without creating sustainability.
The Rule of 40
I have always liked this metric because it forces teams to balance growth and efficiency.
When you are below the Rule of 40, it becomes easier to say no to new hires or new initiatives that the business cannot support yet.
When you are above it, you have room to invest in people, in culture, and in long-term initiatives with confidence that the business is healthy enough to sustain it.
Why All of This Matters
Metrics create focus. Focus creates momentum.
You do not need dozens of dashboards. You need clean data, a solid foundation, and a small set of top line metrics that keep every team pulling toward the same outcomes.
The companies that win are not the ones with the most numbers. They are the ones with the clearest numbers.
If you want my ARR waterfall template or help setting up your tracking, send me a message on LinkedIn and I will share it with you.
