What if I told you that the key to your SaaS success has been staring you in the face all along?

I'm Brittani Dunlap, CEO and co-founder of FlowEQ, and I'm here to let you in on a little secret: Your business metrics matter. I mean really, truly matter in determining whether your startup thrives or dives.

But I get it. As an entrepreneur, you're busy building product, pleasing customers, and trying to stay sane. Tracking a bunch of confusing KPI acronyms probably falls somewhere near the bottom of your priority list.

Well, my goal today is to convince you to bump metrics way UP on that list. Because identifying and monitoring the right KPIs will provide the pulse of your business and profoundly impact your trajectory.

SaaS metrics
It goes without saying that Saas orgs want to grow and scale, right? Whether you’re a hot new startup, mid-growth, or a late-growth established brand, all SaaS orgs want their revenue to skyrocket.
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Think of metrics as your GPS navigation system, keeping your SaaS company on track amidst the twists and turns of startup life. Except your success depends less on Siri's voice directions, and more on heeding what the data and trends reveal.

The right KPIs will help steer your business to growth and prosperity. But first, you have to tune out the metric noise and get crystal clear on the vital few metrics that matter most.

So let's dive in! Here's what I'll cover:

  • Why KPIs matter
  • How to identify the right KPIs for your business
  • Examples of essential SaaS KPIs
  • Tips for tracking and presenting your metrics
  • My journey to determining the right KPIs

Why KPIs matter

KPIs are more than just numbers on a spreadsheet. When approached correctly, metrics will:

- Bring your company strategy to life

- Reveal patterns and opportunities over time

- Identify gaps you need to address

- Help you understand your customers better

- Influence your decision making and go-to-market strategy

- Provide compelling data for fundraising

In short, the right KPIs will provide the pulse of your business. They serve as decision-making guideposts that can profoundly impact the trajectory of your company.

OKRs for SaaS startups
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Future of SaaSEmma Bilardi

As someone who isn't in the day-to-day trenches like you are, KPIs help bring context to what's going on inside your business. The importance of measuring performance will begin to reveal patterns over time.

These patterns identify the gaps you’ve been running into. As you start closing these gaps, you find you naturally understand your customers more.

Since we all need to build something people want, once we understand our customers, this starts to influence our decision making and how we take our product or company to market.

So knowing this information is incredibly critical, especially when it comes to fundraising. Because like I said, KPIs are what brings your business to life for external stakeholders.

How to identify the right KPIs

With so many potential SaaS metrics to choose from, how do you determine the vital few to focus on?

Here are my recommendations:

🎧 Tune out the noise.

Don't get distracted by the endless lists and opinions on metrics. Stay laser focused on identifying the KPIs that matter most to your business.

I know it's tempting to Google "top KPIs for SaaS" and get overwhelmed by pages of information. But you need to be able to drown out that noise and unsolicited opinions from people who have never actually run a SaaS company.

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📈 Determine your primary metric.

For most for-profit SaaS companies, the primary metric will relate to revenue in some form (MRR, ARR, etc). This metric reflects whether people are willing to pay for your product.

Ask yourself - what metric will investors and competitors use to determine if you are successful? For most of us in the for-profit world, it comes down to revenue.

📊 Identify 3-5 secondary metrics.

These are the metrics that will directly impact your ability to drive growth in your primary metric. Choose ones aligned to your business model and goals.

Revenue does not appear out of thin air. You need to identify supporting metrics that affect your ability to drive revenue growth.

I recommend choosing 3-5 secondary metrics that will assist in driving your primary revenue metric. The ones I list later may not all make sense for your business - and that's okay. Focus on the ones that directly apply.

đŸȘžAvoid vanity metrics.

Don't get seduced by metrics that look nice but don't actually demonstrate the health of your business. Vanity metrics may attract some initial attention, but over time they do not accurately reflect the performance of your business.

đŸȘĄ Customize for your industry.

SaaS companies in different verticals may require a slightly different set of KPIs. Choose ones that fit your specific market.

For example, a social media platform will need to track different metrics than a B2B SaaS company. Make sure you choose metrics that align with your goals and business model.

Essential SaaS KPIs to consider

While your ideal metrics depend on your specific business, here are some I recommend SaaS companies consider tracking:

Customer success metrics that drive 95% retention
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đŸ€ For B2B SaaS:

- MRR (monthly recurring revenue)

- ARR (annual recurring revenue)

- Number of product demos

- Demo-to-customer conversion rate

- Number of new customers per quarter

- Product engagement

- Net revenue retention

- Sales cycle funnel velocity

MRR and ARR help me monitor recurring revenue on a monthly and annual basis. Conversion rates from demos to customers show how effectively our sales team converts prospects.

I also look at product engagement across our customer base, since higher engagement results in improved retention and expansion revenue.

Monitoring net revenue retention provides insights into customer lifetime value and tracking sales funnel velocity identifies opportunities to improve our sales process.

đŸ›ïž For consumer products/ecommerce:

- Revenue

- Active users

- Returning users

- Customer lifetime value

- Customer acquisition cost

Ecommerce merchants will want to track revenue, user engagement metrics, and customer acquisition costs.

Subscription consumer companies would focus heavily on retained subscribers.

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đŸ“±For social products:

- Monthly active users

- Daily active users

- User retention

- User engagement

- App store ratings

For ad-driven social platforms, monthly and daily active users, engagement, and retention are critical. Poor app store ratings can quickly tank growth.

Focus on the metrics that will best reflect the health and growth of your particular business model.

Avoid getting distracted by vanity metrics that don't move the needle.

My journey to choosing the right KPIs

As the CEO of a B2B SaaS company called FlowEQ, determining our vital few KPIs to track was crucial but also challenging. I'll admit it took some trial and error before I landed on the right metrics to monitor.

Here are the few metrics I pay closest attention to now:

MRR - I monitor this daily as it shows our recurring revenue growth

ARR - Annual recurring revenue is important to track as well

Number of demos - I look at weekly and monthly demos and conversion rates

New customers - Tracked quarterly based on our sales cycle

Engagement - We have better retention when customers use 2+ integrations

Net revenue retention - Shows me customer lifetime value and expansion potential

Sales funnel velocity - Helps me improve our sales process

I share this to demonstrate how you need to choose metrics tailored to your business model and goals.

Look for the connections between metrics - how do they impact each other? This will help you build a holistic view of the health of your business.

Tips for tracking and presenting your metrics

Once you've identified your vital KPIs, make sure you track and present them effectively:

Be clear, not clever -  When sharing metrics, be straightforward. Clever metrics can confuse stakeholders.

Understand key metric terms -  Know the difference between bookings vs. revenue, MRR vs. ARR, etc. Investors will expect you to know the terminology, but don't be afraid to ask for clarification if needed.

Highlight recurring revenue - This demonstrates sustainability and scalability. Focus on metrics tied to recurring revenue versus one-time services or sales.

Track cash burn rate - Critical for early stage companies to monitor how quickly they are depleting cash. Keep a close eye on your burn rate.

Show growth trends - Analyze how key metrics are trending over time. Are they increasing or decreasing? YOY change? Investors want to see growth.

Don't manipulate data - Present metrics transparently, even if they don't fully align to goals. Manipulation will backfire. I strongly suggest full transparency - no one wins when data is tweaked.

Properly tracking and communicating your KPIs will educate stakeholders on what matters most in your business. Be clear, be consistent, and be transparent.

Customer retention metrics and how to action them
How do successful SaaS organizations measure retention and what on earth do they with the results, I hear you cry? Well, we surveyed 100 SaaS pros to find out how they track, review and utilize retention and churn metrics, and here are the results.
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Final thoughts

I hope these insights help provide some clarity on which KPIs really matter for SaaS businesses like yours!

Identifying and tracking the right metrics is crucial, but I know it can also feel overwhelming. My advice? Start small. Choose 2-3 metrics that will give you an accurate pulse on the health of your startup.

Stay focused on the metrics that directly impact your ability to delight customers and drive sustainable growth. Let the vanity metrics fall to the wayside.

Most importantly, don't let the pursuit of metrics distract you from your core mission. As entrepreneurs we get caught up in the day-to-day data, when in reality, success comes down to solving real problems for real people. Don't lose sight of the big picture.

Remember - progress over perfection. Direction over speed. And metrics that matter over vanity.

You’ve got this. Now get out there, track those KPIs, and steer your startup to success!

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