Critical SaaS Sales
Metrics to Track

You need data to make the right decisions, there's no way around it.

You can try as many strategies as you want, but if you aren't doing it with data in mind, you will not see success.

In this article, we'll go over the critical SaaS sales metrics you want to be tracking as a startup owner to maximize your company's potential.

Let's go!

SaaS sales metrics are the numerical, quantifiable data that serve to measure the success and performance of your sales efforts at a specific objective. In sales, that objective is typically selling a certain amount on a monthly, quarterly, or yearly basis.

We've covered the importance of sales KPIs before, a type of metric, as they help demonstrate how successful your sales team is at generating revenue, managing costs, and generating gross profit. They help you understand where your team is doing well and where it's not, and start analyzing why it's not doing well in those areas, and how to improve them.

Reviewing your sales metrics and pinpointing which ones to track on a consistent basis can be difficult at first, so let's go over which ones are key for you to pay attention to.

Net Revenue Retention Rate (NRR) is the percentage of revenue you have made and retained from existing customers at the start of a financial period once you have accounted for expansion revenue and churn.

Essentially, it is a track record of predictable revenue. Its main purpose is to determine the recurring revenue from existing customers during a specific time period, helping you to see how likely it is to continue and to measure how changes you make to your product or service affect it.

Predictably, the higher the NRR, the more likely the company will continue growing. You want to be at over 100% as a SaaS company, as this means you are growing rapidly, being efficient with your spending, and allocating resources and capital correctly. Anything below means you are contracting and losing customers.

The formula for NRR is:

NRR = (Starting MRR + Expansion MRR - Churned MRR) / Starting MRR

Expansion MRR covers upselling, cross-selling, upgrades, and tier-based price increases. Churned MRR covers churn, cancellation, non-renewals, and other contractions.

Having a high NRR means you understand your customers, have a positive relationship with them, and have an idea of what future customers and expansion can look like.

Monthly Recurring Revenue (MRR) is the total revenue generated by a SaaS company from active customers and subscribers in a particular month. We saw it mentioned above in the NRR formula, it's the predictable amount of revenue generated by your business on a monthly basis.

It's what you can count on to receive every month, and as such, excludes one-time fees.

SaaS companies are always looking to determine and grow their MRR.

To calculate your MRR, the formula is:

MRR = Number of Monthly Users x Average Revenue per User

You can calculate many different types of MRR separately to determine the minutia of your business and its health. But knowing and having a predictable revenue coming in every month is incredibly important for your business to grow.

Annual Recurring Revenue (ARR) is, then, the predictable revenue you make from users on an annual basis.

It's an important number to know when it comes to financial decision-making for long-term planning, funding, and debt options.

To calculate your ARR, the formula is:

ARR = (Total Subscription Revenue for the Year + Recurring Revenue from Add-Ons and Upgrades) - Revenue Lost from Cancellations or Downgrades for the Year

Customer Acquisition Cost (CAC) is a numerical value of how much it will cost your business to attract new customers. After all, finding new customers is always more costly.

You need to invest in more outreach options, channels, salespeople, and sales tools - and it all adds up. In order to know how much money you are actually taking home from your sales, you need to know how much you're spending on making it happen, and if it makes sense to spend that much.

It helps you determine if you're allocating your capital correctly, or if you can cut costs on certain tools or outreach channels that are not generating enough revenue.

The formula to calculate CAC is:

CAC = (Cost of Sales + Cost of Marketing) / New Customers Acquired

Churn rate is the measure of how many customers you lose on a monthly basis.

We've written about churn rate before because no matter the quality of your product or service, you will lose customers every month and experience churn. For SaaS companies, this is mostly subscriptions that are not renewed. And they do it for various reasons, not all related to you.

But there are things you can do to try and mitigate it, which is why you want to keep an eye on it. After all, an excessively high churn rate definitely means something is wrong, and you need to make a change, but you need to know about it to make that change. The lower it is, the more customer you have retained.

Churn rate lets you know how well-received your product or service is, and how satisfied your customers are with you.

The formula to calculate the churn rate is:

(# Customers at Start of Period - # Customers at End of Period / Total Customers at Start of Period) x 100 = Churn Rate

Net Promoter Score (NPS) is a tool to measure customer satisfaction: how likely a user is to recommend your product or service to someone else. You are gauging customer satisfaction, loyalty, and enthusiasm for your business, product, or service.

NPS is important to calculate because it helps you learn about customers' general sentiment toward your brand. It helps you evaluate how you're performing as a company, compare yourself to competitors, and find ways to improve and surpass them.

To calculate NPS, the formula is:

NPS = (Number of Promoters — Number of Detractors) / (Number of Respondents) x 100

The result will always be expressed as a number from -100 to 100. Negative numbers mean that a company has more detractors than promoters, and vice versa.

Scoring above 0 is always considered good, as it means you have more supporters than detractors. A top-tier business generally has an NPS of 70 or above, but it's not simple enough to have a big name. For instance, in 2018, PayPal's NPS was 63, Amazon's 54, Google's 53, and Apple's 49.

Customer lifetime value (LTV) is how much worth the business of a particular customer throughout the course of their relationship with your company.

You're not looking at individual transactions, but all potential transactions you may have with a customer over the course of your relationship, calculating the specific revenue you have made from that customer, as well as potential predictive revenue.

So you can either look at historic customer lifetime value, how much revenue you'd made from them, or predictive customer lifetime value, how much you can expect to make based on the established pattern and what you know.

Both are useful and important measurements to consider when tracking your success and metrics as a business.

Knowing this metric, you can spot and stop attrition, find your best customers and aim to duplicate them, as well as discover how much it's costing you to retain them.

The formula to calculate this metric is:

LTV = Customer Revenue per Year x Duration of the Relationship in Years – Total Costs of Acquiring and Serving the Customer

Win rate is the percentage of deals that are closed successfully. It's a useful metric to keep track of in sales as it helps you find the types of customers that are most likely to buy at a particular point in time, and how your sales efforts and strategies are doing, and adjust accordingly.

You can calculate a win rate either by taking into account the total number of sales opportunities, including unqualified leads to help you determine if you are targeting the right ICP. Or, you can exclude the unqualified leads, as it allows you to determine how your conversion of qualified leads is going.

To calculate the win rate, the formula is:

Win Rate = Closed Won Deals / (Closed Won Deals - Lost Deals)

Sales qualified leads (SQLs) are prospective customers that have moved through the sales pipeline and are now in a part of the funnel where your sales team is working to convert them into active customers. They've gone from marketing qualified leads to sales-accepted leads.

It's important to keep track of this metric because it helps you determine the success of your marketing efforts and sales teams, and find improvement opportunities. Understanding what brings SQLs in helps you focus your targeting efforts so that you can close more deals, more effectively.

The way to keep track of it is to simple have a standing tally of how many SQLs you receive on a monthly or quarterly basis, and see how they respond to changes in strategy or season.

Lead Velocity Rate (LVR), shown as a percentage, measures the growth of qualified leads your business generates monthly. In other words, you're measuring how your SQLs grow on a monthly basis. It serves as an indicator of your pipeline's efficiency and your long-term growth potential as a startup.

It shows you if your pool of SQLs is growing and increasing steadily, which is a good sign of future growth and opportunity. Having this metric handy and tracked allows you to project and plan more accurately for growth and scalability. And, if that pool is not increasing, you can begin to investigate why that is.

Knowing your LVR will help you optimize your marketing and sales efforts. It is a strong predictor of future revenue, provides a real-time snapshot of your sales performance, and will rapidly show growth rate changes, meaning your marketing and sales teams can adapt quickly and effectively.

The formula to calculate LVR is monthly and looks like this:

LVR= (Number of Qualified Leads in the Current Month – Number of Qualified Leads Last Month) / Number of Qualified Leads Last Month x 100

Deal velocity, as its name implies, measures how long it takes a company to negotiate and sign a contract to close a deal successfully. Often overlooked as a metric that can be used for improvement, it can be incredibly useful for organizations looking to maximize the full value of a deal.

This last part of finalizing a sale is often the slowest. There is a lot of back and forth between prospects and AEs regarding the minutia of the contract. They typically take between 5 to 10 iterations before an agreement can be signed. Each iteration can vary in time, from days to weeks. Everyone wants to make sure the contract accounts for all possibilities before signing, after all.

But to your cash flow, this is simply a drag. And it can even cause issues with the deal itself the longer it drags out or stalls, as prospects become more likely to change their mind over time. You want to impress the prospect and build from this relationship, not drive them away.

Having an idea of how long it's taking to do this will help you mitigate and account for more eventualities every time you get to this part. The quicker and more efficient you are, the less likely you drive prospective customers away.

To calculate deal velocity, the formula is:

Deal Velocity = Sales Opportunities Sent to Legal x Average Deal Value x Win Rate / Number of Days Deal Is in Legal Until Signed

Closed Won/Lost assesses the overall effectiveness of your sales cycle by comparing your won to lost rate. And it helps you understand if you have a good product-market fit.

Calculating both won and lost is important to determine how successful you are being truly. You always want the won number to be higher than the lost; if the loss is higher, you want to understand why immediately so you can accommodate and adjust your efforts accordingly.

You need closed lost to understand customer retention and why some prospects do not become customers, and you need closed won to understand why prospects are becoming customers or being upsold to successfully.

You can learn to replicate the successes and mitigate the losses by understanding both.

If you're in SaaS, you need to always keep an eye on the numbers. It's a competitive market out there, and if you ignore the numbers and go in blindly, you won't survive long.

Keep track of your sales metrics and learn everything you can about them so that you can always adjust and recognize when you need to adjust. Or when you need to duplicate your successes and how to do so.

And if you're looking for top sales talent to help you get started, be sure to get in touch with us here at SalesPipe for high-quality outosurced SDRs that will help you stay on top of your metrics!