5 Key Metrics to Track for SaaS Growth and Profitability

SaaS businesses live and die by their numbers. If you want to ensure your SaaS is growing and profitable, tracking the right metrics is essential. Without visibility into key performance indicators (KPIs), you’re flying blind—and your competitors are probably outperforming you.

Here are the 5 key metrics you need to be tracking to drive SaaS growth and long-term profitability.

1. Customer Acquisition Cost (CAC)

What it is: Customer Acquisition Cost (CAC) measures how much it costs to acquire a new customer. It includes all the sales and marketing expenses (ads, salaries, tools) divided by the number of customers gained in that period.

Why it matters: High CAC can be a silent growth killer. If you’re spending too much to acquire customers and not generating enough revenue from them, your growth will eventually stall. A low CAC relative to Customer Lifetime Value (CLTV) means you can scale more efficiently, while a high CAC signals inefficiency in your sales funnel.

How to optimize it:

• Streamline your sales funnel: Automate parts of your customer journey, reduce friction in sign-up processes, and provide clear CTAs.
• Target high-intent leads: Focus on marketing channels that bring in prospects more likely to convert.
• Leverage organic growth: Content marketing, SEO, and referrals can help you acquire customers without paying as much for ads.

2. Customer Lifetime Value (CLTV)

What it is: Customer Lifetime Value (CLTV) represents the total revenue you can expect from a single customer over the entire period of their relationship with your business.

Why it matters: CLTV helps you understand the long-term value of each customer, which is crucial for deciding how much you can spend to acquire them. A higher CLTV means more profit from each customer and a stronger overall business model.

How to improve it:

• Upsell and cross-sell: Offer premium features or complementary products to increase the average revenue per customer.
• Reduce churn: Focus on improving customer satisfaction through excellent support, onboarding, and regular product updates.
• Extend subscription periods: Annual plans or multi-year subscriptions can increase CLTV by locking in customers for longer.

3. Monthly Recurring Revenue (MRR)

What it is: Monthly Recurring Revenue (MRR) is the total predictable revenue your SaaS business earns each month from active subscriptions.

Why it matters: MRR is the heartbeat of any subscription-based business. It provides a clear view of how much revenue you can expect each month, helping with financial forecasting and growth planning. It’s also the best way to track if your business is growing steadily or losing ground.

How to grow MRR:

• Focus on customer retention: Keeping customers happy and reducing churn has a direct impact on MRR.
• Expand your pricing options: Offer tiered pricing or feature add-ons that encourage existing customers to upgrade.
• Acquire new customers: Drive growth by increasing your acquisition efforts through marketing, partnerships, or referral programs.

4. Churn Rate

What it is: Churn rate is the percentage of customers who cancel their subscriptions or fail to renew within a specific time frame.

Why it matters: High churn rates are a red flag for any SaaS business. If too many customers are leaving, you’ll struggle to maintain steady growth, even if you’re acquiring new users. Reducing churn is often the most cost-effective way to grow your business, as retaining a customer is far cheaper than acquiring a new one.

How to reduce churn:

• Improve onboarding: Make sure new users understand your product’s value quickly, through guided tutorials or personalized onboarding.
• Proactive customer support: Address issues before they lead to cancellations. Regular check-ins and offering solutions can make a big difference.
• Offer incentives: Provide discounts, bonuses, or loyalty rewards to encourage customers to stick around.

5. Net Revenue Retention (NRR)

What it is: Net Revenue Retention (NRR) measures how much revenue you retain from your existing customers over a set period, after factoring in upgrades, downgrades, and churn.

Why it matters: NRR above 100% means you’re growing revenue from your existing customer base, which is a strong signal of product-market fit and customer satisfaction. It indicates that your current customers are sticking around and spending more over time, making it one of the most powerful metrics for sustainable growth.

How to improve NRR:

• Upsell and cross-sell effectively: Encourage customers to upgrade their plans or buy additional features.
• Minimize downgrades: Understand why customers downgrade and offer solutions to help them stick with higher-tier plans.
• Focus on product engagement: The more value customers get from your product, the more likely they are to expand their usage.

Final Thoughts

Tracking these five key metrics—CAC, CLTV, MRR, Churn Rate, and NRR—gives you a clear roadmap for optimizing your SaaS business. The right balance between acquiring new customers and retaining existing ones is crucial for both growth and profitability.

By staying on top of these KPIs, you’ll ensure your business is on a path to success, with scalable growth and a sustainable bottom line.

Make sure you're tracking these metrics consistently, and use the insights to guide your decision-making. When you understand these numbers, you have the power to fine-tune your strategy, fix bottlenecks, and unlock new levels of growth for your SaaS business.