• Andy Hamilton

SaaS Metrics for Enterprise Software

Recently, I asked a couple of founders and a local M&A advisor for their views on the appropriate key metrics to track when you are an enterprise SaaS business. There may be some metrics that are missing, perfection is not what I am focused on, traction and momentum I am!

What are the key metrics for Enterprise SaaS companies to track over time?

In creating this, I received some great input from Mike Carden of Joyous, Danny Tomsett of Uneeq and Mark Clare of Clare Capital – thank you for sharing and enabling others to see this.

What key metrics?

Mike Carden manages to these 5 key metrics:

  1. LTV vs CAC

  2. MRR & ARR

  3. Growth Rate

  4. Churn Rate

  5. Cash Runway

Read Mike’s thoughts https://www.linkedin.com/pulse/5-key-saas-benchmarks-start-ups-michael-carden/

Mike also is a big fan of Return on Capital Invested. The theory is that for each $ you raise, it should result in a 5x increase in enterprise value for the next round. As Mike says, “let that one sink in”.

What do investors look for?

Danny Tomsett shared some perspectives around what an investor looks for:

  1. Revenue Growth

  2. Customer acquisition growth rate

  3. MRR net retention rate - high churn likely at early stage, however some clients growing is key

  4. MRR growth rate

  5. LTV or if too soon, average MRR per client.

  6. Sales Efficiency (showing tracking improvement ideally)

  7. CAC:Revenue ratio and/or gross margin.

  8. Conversion rates across each stage Inbound/Outbound> MQL > SQL> Closed won

  9. Sales cycle

  10. Product / Market Fit

  11. Market segmentation data / buyer persona validation

  12. Annual renewals

  13. Survey data - this method provides some key insights - https://coda.io/@rahulvohra/superhuman-product-market-fit-engine

  14. Operating Health

  15. Cash Burn rate

  16. Days to zero 

Mike and Danny also both have adopted OKRs for their teams with a focus mostly around Team, Engineering, Marketing, Sales, Product Health and Customer Advocacy.

What tools do people use for tracking?

So many different options, all use OKRs, to trail down the key metrics to everyone across the business, or One Metric (Rowan Simpson), others customise their CRM. I have also seen people work out the metrics and then just release them on a tool like Notion and let people iterate on the fly.

How do you position this with what is happening in the market for raising capital?

So I asked Mark Clare of Clare Capital to break it down a bit more. He shared several relevant presentations and documents:

Key Metrics for SaaS Companies - 2018 Southern SaaS conference on SaaS metrics.

Clare Capital Southern SaaS - SaaS Metri
Download • 952KB

How to Calculate SaaS Metrics – a useful two-page summary that can easily be circulated.

Clare Capital Tech Insights 87 - SaaS Me
Download • 123KB

Confidential SaaS metrics benchmarking exercise for NZ SaaS businesses.

Clare Capital SaaS Benchmarking Metrics
Download • 489KB

How fast is fast T2D3 - $2M in ARR then triple, triple, double, double, double

Clare Capital Tech Insights 36 - How fas
Download • 141KB

In my research I also found a couple of recent presentations from investors and avisors that are worth digging into:

OpenView 2020_SaaS Product Benchmarks
Download PD • 7.18MB
Redpoint GTM Survey Giometti
Download PDF • 2.58MB