Metrics are important to investors because they provide visibility into a SaaS company's revenue growth, sales efficiency, and customer retention. Key metrics include monthly recurring revenue/annual recurring revenue to measure topline growth, revenue churn to understand customer retention, and customer acquisition cost and lifetime value to assess the efficiency and profitability of the growth strategy. Maintaining high growth, strong sales efficiency through a favorable magic number ratio above 1, and low revenue churn are positive signs for investors.

3. Why Are Metrics Important To Investors?
• The SaaS economic model is unique because it relies on
small amounts of recurring revenue, instead of the large,
upfront payments of traditional software sales.
• When recurring revenue is the lifeblood of your business, you
need monitor your KPI’s in near real-time.
• The relevancy of specific KPI’s depends on many factors
such as the growth stage of the Company, business model,
macro economic conditions and more.
• Obsessing over SaaS KPIs isn’t always productive.

4. • If you can accurately match customer acquisition costs to revenue, you are at the top of your class.
• Over-invest in plugins that produce advanced revenue analytics reports, allowing you to see revenue attributed to marketing sources
and campaigns.
• Every customer acquisition channel must be tracked, ideally several layers deep.
• If utilizing a freemium model, ensure that both initial date of acquisition and date of conversion to paid are tracked.
• Make sure your clients receive numerous referral codes with bonuses and track the results. Referral revenue tends to be under-
tracked, particularly for B2B companies.
• There are numerous plugins that can take your data and create visual KPI dashboards automatically, but these are subject to
garbage in/out problems if not set up properly.

5. Revenue Growth: High-growth demonstrates to investors the potential for value creation. Note, focus is on revenue,
not bookings. (MRR/ARR)
Sales Efficiency: Sales Efficiency, or more accurately Distribution Efficiency, is vital because when scaling
software, it's fundamentally about distribution. The correlation between dollars spent on sales and marketing and the
revenue returned indicates the value generated per dollar invested. (Magic Number>1)
Revenue Churn: Revenue Churn is significant because its impact intensifies as growth diminishes, setting a limit on
a company's potential size. At its core, high churn signifies a product that isn't meeting customer needs. (Revenue
Churn)
Cash Burn/Operating Income: This is a measure of aggressiveness. A high operating loss coupled with a high
growth rate and high sales efficiency is an aggressive but probably sensible strategy if you have access to capital. A
high burn, low growth company is a disaster in the making. (Operating Income as a % of Revenue.)

6. Monthly Recurring Revenue (MRR)/(ARR): This is the most important metric to focus on. At a minimum
break out New Customer ARR, Upsell/Expansion ARR & Churned ARR.
Revenue Churn: The % of MRR lost each month
Customer Acquisition Cost (CAC): Shows the cost side of growth – track carefully.
CAC Payback Period: Measures the amount of time in months required to break even on customer
acquisition. This should not exceed the length of the contract. 6-9 months a current benchmark.
Lifetime Value (LTV): Indicates long-term revenue potential from customers.
LTV to CAC Ratio: Provides a combined perspective of profit potential and acquisition efficiency
Also - Cash, CMRR, Rule of 40

7. Churn Rate: Measures customer retention and satisfaction. Customer Churn Rate = Customers
unsubscribed over the period / Number of customers at the start of the period. 20% is median, 6% is best.
Viral Growth: AKA ‘Viral Coefficient’, is the number of new users a current user creates.
Lead Velocity Rate (LVR): Quantifies your business' growth in terms of qualified leads.
Free to Paid Conversion Rate: Important for companies with freemium models to understand their
upselling potential.
Net Promoter Score (NPS): Gauges customer loyalty and satisfaction. (# promoters / total # of survey
respondents x 100) - (# detractors / total # of survey respondents x 100)

8. Magic Number: Change in subscription revenue between two quarters, annualize it, and divide the
result by the sales and marketing spend for the earlier quarter.
Average Revenue Per User (ARPU): Measures growth and traction you have with clients.
Quick Ratio: A quick ratio is a difference between MRR added and lost. Four (4) is a good benchmark.
Expansion Revenue: Reflects the potential for revenue growth within the existing customer base.
Marketing Sourced Revenue (MSR): Indicates how much money your company is making from your
marketing efforts.
Active Trials: Freemium models only.
Growth Rate: Indicates the pace at which the revenue is expanding.
Customer Growth Rate: It shows how effectively your business is growing and where you are lacking.