Article
The key SaaS growth metrics you need for all your SaaS business stages
Aug. 1, 2022 · Authored by Chris Price
One of the primary challenges many SaaS and subscription businesses face is determining what metrics to track. While all B2B SaaS and subscription businesses are different, there are a handful of key metrics that most can benefit from to optimize performance, propel growth, and attract investors. We’ve outlined the SaaS growth metrics investors are looking at during each of the SaaS growth stages to see if you’re on track and to help you prepare for what’s ahead.
Attracting investors: key SaaS metrics for early stage and Series A funding
SaaS and subscription businesses in the early stage are often still trying to find their footing: they may still be determining product-market fit and may not have gained robust market traction. In addition, their financial tracking may not be fully mature. At this stage, investors are asking broader questions, including:
- Is there a market for this product?
- Can the company grow or is it beginning to grow?
They may look to metrics like CARR and CMRR growth as an indicator of market fit and to determine if that growth is steady and predictable (or at least has the potential to be.) Cash flow is a critical metric at every stage, but early-stage companies face particular challenges as they seek to cover startup and operating expenses at a time when they have very few customers. Investors may pay close attention to operational issues that drain cash flow and whether the company can cost-effectively attract enough customers to help sustain it.
While these early metrics remain important as SaaS and subscription businesses move into Series A, investors begin to dig deeper in a broader set of metrics. They may look at CAC to better understand the cost of acquiring new customers, what types of activities are driving that spend, and how high-touch those activities are (as high-touch activities like personal interaction can be more costly or challenging at scale.) They may look closely at churn to determine how long customers are staying, if customer lifetime is long enough to cover CAC payback, whether they are renewing, and what the potential impact of their behavior is on cash flow. They may also begin to look at gross margin to understand whether the business model has potential for levels of profitably that meet their expectations.
