As a SaaS (Software as a Service) company, securing investment is crucial for scaling operations and reaching new growth milestones.
However, convincing investors requires more than just a great product—it involves demonstrating solid business fundamentals through key metrics. Investors want to see data-driven evidence of your company’s health, growth potential, and profitability.
In this guide, we’ll explore the 13 essential SaaS metrics you need to track and present during investor meetings.
Each of these metrics provides insights into different aspects of your business, from customer acquisition to revenue growth. Understanding and communicating these numbers effectively will help you gain the confidence of potential investors and set the stage for future success.
Why Tracking SaaS Metrics is Crucial for Investor Meetings
Metrics serve as the backbone of any successful SaaS investor meeting. Investors use these metrics to gauge the current and future performance of your business.
While an engaging product demonstration and a visionary pitch can grab attention, it’s the hard data that will ultimately convince investors to invest.
These numbers reflect how well your company is performing, highlight areas for improvement, and indicate the long-term growth potential of your business.
What Investors Look for in SaaS Metrics
When meeting with potential investors, they’ll be looking for metrics that reflect the overall health and scalability of your SaaS business. Some of the primary concerns for investors include:
- Revenue Growth: Investors want to see steady, upward growth in monthly recurring revenue (MRR) and annual recurring revenue (ARR).
- Customer Retention: Retaining customers is often more important than acquiring new ones. High retention rates signify a loyal customer base.
- Scalability: Investors need to know whether your business can scale quickly without exponentially increasing costs.
- Unit Economics: The financial viability of acquiring and retaining customers plays a big role in determining your company’s profitability and potential for growth.
Let’s dive into the 13 key SaaS metrics you should track and present to investors.
1. Monthly Recurring Revenue (MRR)
Monthly Recurring Revenue (MRR) is one of the most fundamental SaaS metrics. It represents the total predictable revenue generated from subscriptions each month.
MRR is important because it provides investors with a clear picture of how much revenue your company brings in on a monthly basis and how it is growing over time.
MRR helps to eliminate the volatility of one-time sales or irregular payments, offering a consistent measurement of financial health. It also serves as a baseline metric that other key SaaS performance indicators, such as growth rate and churn, are often tied to.
How to Calculate MRR
To calculate MRR, multiply the total number of paying customers by the average revenue per user (ARPU) for that month. For instance:
MRR = Number of Customers x ARPU
If your SaaS product has multiple pricing tiers, you should segment your MRR calculations by plan to gain more insight into the performance of each plan.
Why Investors Care About MRR
Investors are drawn to MRR because it provides them with a snapshot of your company’s current revenue generation capabilities. Investors will often evaluate MRR growth over time to determine the potential for revenue expansion. Consistent MRR growth is a strong indicator of product-market fit and a healthy subscription base.
2. Annual Recurring Revenue (ARR)
Annual Recurring Revenue (ARR) is another key SaaS metric that tracks the yearly subscription revenue your company generates. Like MRR, ARR focuses on predictable, recurring revenue rather than one-time transactions, but it measures this on an annual scale.
For SaaS companies, ARR is often a better measure of growth potential than monthly revenue alone, as it accounts for longer-term contracts, pricing adjustments, and annual subscriptions. This metric gives investors a broader view of your company’s ability to generate stable, long-term revenue.
How to Calculate ARR
ARR is calculated by multiplying your MRR by 12 months. For instance:
ARR = MRR x 12
If your SaaS business has a mixture of monthly and annual contracts, ensure you include only recurring revenue from subscriptions when calculating ARR, and exclude any one-time fees or additional services.
Why Investors Care About ARR
Investors value ARR as it demonstrates the potential longevity of your revenue streams. A steadily growing ARR indicates that your company is signing long-term contracts and building sustainable revenue. It also helps investors project your future revenue growth, which is critical for evaluating the viability of their investment.
3. Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) measures the total cost your company incurs to acquire a new customer. This metric includes expenses like marketing, sales, advertising, and any other costs related to lead generation.
CAC is a crucial metric because it directly impacts the profitability of your business. If your CAC is too high, it could mean that you’re spending too much on acquiring customers, which could hurt your overall financial health.
CAC is especially important for SaaS businesses, as acquiring new customers can be expensive, but these costs should ideally be offset by long-term recurring revenue.
How to Calculate CAC
CAC is calculated by dividing your total sales and marketing expenses by the number of new customers acquired during that period. For example:
CAC = Total Sales and Marketing Costs / Number of New Customers
This metric should be monitored regularly to ensure that the cost of acquiring new customers is balanced against the revenue they generate for your company.
Why Investors Care About CAC
Investors are particularly interested in CAC because it provides insight into how efficient your sales and marketing efforts are. A lower CAC indicates that you’re able to acquire customers more cost-effectively, which is a sign of scalability. High CAC, on the other hand, can be a red flag, as it may suggest inefficient marketing strategies or a lack of product-market fit.
4. Customer Lifetime Value (CLTV)
Customer Lifetime Value (CLTV) represents the total revenue a customer is expected to generate for your company during their entire relationship with your business.
CLTV is an important metric because it allows you to estimate the long-term value of your customer base and understand the potential revenue a customer will bring in over time.
For SaaS companies, where customers typically subscribe to services on a recurring basis, maximizing CLTV is crucial for driving profitability. It also helps determine how much you should be spending to acquire and retain customers.
How to Calculate CLTV
CLTV is calculated using the following formula:
CLTV = (ARPU x Customer Lifetime in Months)
Here, ARPU (Average Revenue Per User) is the monthly revenue generated per customer, and the Customer Lifetime is the estimated time a customer stays with your company. To get the most accurate CLTV, you’ll need reliable data on customer retention and churn rates.
Why Investors Care About CLTV
Investors view CLTV as an indicator of long-term profitability. A high CLTV suggests that customers find lasting value in your product and are willing to stick around, paying for your services over extended periods.
By showing a favorable CLTV to CAC ratio (typically aiming for a ratio of 3:1 or higher), you can demonstrate that your business is effectively generating long-term revenue from each customer while keeping acquisition costs low.
5. Customer Churn Rate
Customer Churn Rate measures the percentage of customers who cancel their subscription or stop using your service within a given period. For SaaS companies, churn is one of the most important metrics to track, as high churn rates can severely limit growth.
Even if you’re acquiring new customers, losing existing ones can offset revenue gains and reduce overall profitability.
Keeping churn rates low is vital to maintaining healthy MRR and ARR, as recurring revenue depends on customer retention.
How to Calculate Churn Rate
Churn rate is calculated by dividing the number of customers lost during a period by the total number of customers at the start of that period, then multiplying by 100 to get a percentage. For example:
Churn Rate = (Customers Lost / Total Customers at Start of Period) x 100
A lower churn rate indicates that your business is successfully retaining customers and that your product continues to meet their needs.
Why Investors Care About Churn Rate
Investors pay close attention to churn rate because it directly impacts customer retention and MRR stability. A low churn rate indicates customer satisfaction and a high likelihood of long-term subscription renewals.
If your churn rate is low, it means that your SaaS product has achieved strong market fit and is consistently delivering value to its users, which is a key factor in securing investor confidence.
6. Net Revenue Retention (NRR)
Net Revenue Retention (NRR) measures the percentage of recurring revenue retained from existing customers, accounting for upgrades, downgrades, and churn.
NRR is a critical metric because it reveals how well you’re maintaining and growing revenue from your existing customer base without relying on new customer acquisitions.
A high NRR signifies strong customer relationships, effective upselling and cross-selling strategies, and minimal revenue loss from churn.
How to Calculate NRR
To calculate NRR, follow this formula:
NRR = [(Starting MRR + Expansion MRR – Churned MRR – Contraction MRR) / Starting MRR] x 100
Here:
- Expansion MRR represents revenue gained from existing customers through upgrades or add-ons.
- Churned MRR represents the revenue lost from customers who cancelled.
- Contraction MRR represents revenue lost due to downgrades.
Why Investors Care About NRR
NRR is a favorite metric for investors because it demonstrates the quality of your customer relationships and the ability of your company to grow without new customer acquisition.
A strong NRR—ideally above 100%—indicates that your company can consistently increase revenue from existing customers through upselling and cross-selling strategies, even if no new customers are acquired.
7. Gross Margin
Gross Margin is a key financial metric that shows the percentage of revenue left over after accounting for the direct costs of providing your service (such as hosting, support, and maintenance).
For SaaS companies, gross margin is crucial because it reflects the profitability of your core operations before accounting for other expenses like sales, marketing, and R&D.
A high gross margin allows your company to reinvest in growth while maintaining profitability.
How to Calculate Gross Margin
Gross margin is calculated as:
Gross Margin = [(Revenue – Cost of Goods Sold) / Revenue] x 100
For SaaS businesses, Cost of Goods Sold (COGS) typically includes the costs associated with running and maintaining the software, such as server hosting, customer support, and software development.
Why Investors Care About Gross Margin
Investors care about gross margin because it reveals the efficiency of your business model. A high gross margin signals that your SaaS product is scalable, allowing you to generate high revenue without significantly increasing costs. SaaS businesses generally aim for gross margins of 70% to 90%, which indicates strong profitability potential.
8. Lead Velocity Rate (LVR)
Lead Velocity Rate (LVR) measures the growth in the number of qualified leads generated each month. This metric is crucial for SaaS companies because it provides insight into future revenue potential.
A high LVR indicates that your sales and marketing efforts are driving a strong pipeline of potential customers, which will likely translate into increased revenue in the coming months.
LVR helps to predict future sales growth and is often used alongside CAC to assess the efficiency of lead generation efforts.
How to Calculate LVR
To calculate LVR, subtract the number of qualified leads in the previous month from the number of qualified leads in the current month, then divide by the previous month’s lead count, and multiply by 100. For example:
LVR = [(Current Month Leads – Previous Month Leads) / Previous Month Leads] x 100
A positive LVR shows that your lead generation efforts are improving and that more potential customers are entering your sales funnel.
Why Investors Care About LVR
Investors care about LVR because it acts as a leading indicator of future revenue growth. A high LVR suggests that your company has a robust sales pipeline and that revenue growth will likely follow. By tracking LVR over time, investors can gauge whether your sales efforts are scalable and effective.
9. Burn Rate
Burn Rate measures how quickly your company is spending cash before becoming profitable. It is an essential metric for SaaS companies, especially those in the early stages or during rapid growth phases.
Burn rate shows investors how much runway your company has before it needs additional funding.
A high burn rate may indicate aggressive spending on growth initiatives, while a low burn rate suggests more conservative financial management. Both approaches can be acceptable, depending on your company’s stage and growth strategy.
How to Calculate Burn Rate
Burn rate is typically calculated as:
Burn Rate = Monthly Operating Expenses – Monthly Revenue
For early-stage SaaS businesses, Net Burn Rate is often the focus, which represents the net amount of cash being burned each month after accounting for incoming revenue.
Why Investors Care About Burn Rate
Investors are particularly interested in burn rate because it reveals how quickly you’re consuming cash reserves. A high burn rate, without corresponding revenue growth, may indicate that your business will run out of funds before becoming profitable.
Investors often use burn rate to assess how much additional funding you’ll need and whether your business model is sustainable in the long term.
10. Payback Period
Payback Period measures the amount of time it takes to recover the Customer Acquisition Cost (CAC) through the revenue generated by that customer. A short payback period is crucial for SaaS companies, as it allows for quicker reinvestment into growth and reduces the risk of cash flow issues.
Payback period helps you determine how quickly your business can recoup its investment in acquiring new customers, which is particularly important for managing cash flow and sustaining growth.
How to Calculate Payback Period
Payback period is calculated as:
Payback Period = CAC / ARPU
A lower payback period is generally better, as it indicates that you can recover your acquisition costs quickly and reinvest in acquiring more customers.
Why Investors Care About Payback Period
Investors care about payback period because it highlights the financial efficiency of your customer acquisition strategy. A short payback period means your company can recover acquisition costs quickly and achieve profitability faster. SaaS businesses with short payback periods are often more attractive to investors, as they have greater flexibility for scaling operations.
11. Sales Efficiency
Sales Efficiency measures the revenue generated for every dollar spent on sales and marketing. This metric is critical for SaaS companies because it helps determine whether your sales and marketing efforts are yielding a good return on investment.
A higher sales efficiency ratio means that your business is generating more revenue relative to the money it’s spending on acquiring customers.
Sales efficiency can also indicate whether your go-to-market strategy is scalable and sustainable.
How to Calculate Sales Efficiency
Sales efficiency is calculated as:
Sales Efficiency = Net New Revenue / Sales and Marketing Costs
For example, if you spent £100,000 on sales and marketing and generated £200,000 in new revenue, your sales efficiency ratio would be 2, indicating that for every £1 spent, you generated £2 in revenue.
Why Investors Care About Sales Efficiency
Investors care about sales efficiency because it provides a snapshot of how well your company’s sales engine is working.
A high sales efficiency ratio indicates that your sales and marketing teams are performing well and that your company can scale efficiently without spending excessively. This is a key factor when determining the overall health and growth potential of your SaaS business.
12. Time to Value (TTV)
Time to Value (TTV) measures how quickly a customer experiences the value of your product after signing up. This metric is important for SaaS businesses because it directly impacts customer satisfaction and retention.
A shorter TTV means that customers are getting value from your product faster, which leads to higher retention rates and more positive customer experiences.
In competitive markets, reducing TTV can be a crucial differentiator for your product, making it easier to retain customers and reduce churn.
How to Calculate Time to Value
To calculate TTV, track the average time it takes for a new customer to achieve their first success milestone after onboarding. This could be the first successful use of a key feature or the completion of the onboarding process.
There is no universal formula for TTV, as it varies based on the nature of the SaaS product and the complexity of its features. However, the goal is always to reduce the TTV to ensure faster customer satisfaction.
Why Investors Care About TTV
Investors care about TTV because it influences customer retention, churn rate, and overall customer satisfaction. A shorter TTV suggests that your product delivers value quickly, which is crucial for keeping customers engaged and preventing churn. Investors will be more inclined to invest in SaaS businesses that can demonstrate a fast time to value, as it indicates a better customer experience and higher retention rates.
13. Expansion Revenue
Expansion Revenue refers to the additional revenue generated from existing customers through upselling or cross-selling products or features.
This metric is vital for SaaS businesses because it reflects your ability to generate more revenue from your current customer base without having to invest heavily in customer acquisition.
Expansion revenue is a key indicator of customer satisfaction and product value, as customers are more likely to upgrade or purchase add-ons if they see continuous value in your product.
How to Calculate Expansion Revenue
Expansion revenue is calculated by measuring the revenue gained from upsells, cross-sells, or add-on purchases made by existing customers over a specific period.
For example, if your business generated £50,000 from existing customers upgrading to higher-tier plans or purchasing additional features, that amount is considered expansion revenue.
Why Investors Care About Expansion Revenue
Investors value expansion revenue because it demonstrates the stickiness of your product and your ability to drive revenue growth from your existing customer base. SaaS businesses that consistently generate significant expansion revenue are seen as more stable and less dependent on acquiring new customers.
This signals strong product-market fit and customer loyalty, making your company more attractive to potential investors.
Takeaway: Presenting SaaS Metrics in Investor Meetings
Effectively tracking and presenting these 13 key SaaS metrics is essential for building investor confidence and showcasing the health and growth potential of your business.
Investors rely on these metrics to assess the sustainability, profitability, and scalability of your SaaS company, and being well-prepared with accurate data will greatly enhance your chances of securing funding.
When preparing for investor meetings, it’s important to present these metrics clearly and concisely, using visual aids such as charts and graphs to illustrate trends.
Demonstrating a solid grasp of your company’s metrics, along with a compelling growth narrative, will position your SaaS business for success in investor discussions.
By staying on top of these metrics, you’ll be better equipped to make data-driven decisions, optimize your business strategy, and ultimately secure the investment needed to scale your SaaS company to new heights.
