SaaS Metrics.

SaaS metrics are the financial and operational KPIs that investors, operators, and boards use to evaluate the performance and growth trajectory of subscription software businesses. Because SaaS businesses earn revenue over time (not upfront), the metrics reflect long-term value creation and cash efficiency differently from traditional businesses.

Core SaaS Metrics

Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR) measure the predictable subscription revenue base. MRR growth rate shows velocity. Net Revenue Retention (NRR) measures whether the existing customer base expands or contracts month-over-month — an NRR above 100% means growth from existing customers alone. Customer Acquisition Cost (CAC), Customer Lifetime Value (LTV), and the LTV:CAC ratio (target ≥ 3:1) measure unit economics.

Churn

Logo churn (% of customers who cancel) and revenue churn (% of MRR lost) are distinct. A SaaS with 5% monthly logo churn loses half its customer base in a year — unsustainable. Revenue churn can be negative (net negative churn) when expansion revenue from existing customers more than offsets cancellations — the ideal SaaS growth engine.

Rule of 40

The Rule of 40 states that a healthy SaaS company's revenue growth rate plus profit margin should equal or exceed 40. A company growing at 60% YoY can sustain a -20% EBITDA margin; one growing at 20% should be near breakeven. It's a blended indicator of growth efficiency widely used in SaaS investment evaluation.