SaaS metrics are the key performance indicators (KPIs) used to measure the health and growth trajectory of a subscription software business. Unlike one-time software sales, SaaS revenue is recurring, which means the metrics that matter most are about retention, expansion, and efficiency -- not just new bookings.
Revenue metrics
MRR (Monthly Recurring Revenue)
MRR is the sum of all subscription revenue normalised to one calendar month. It has three components: new MRR (from new customers), expansion MRR (upsells and cross-sells from existing customers), and churned MRR (revenue lost from cancellations or downgrades). Net new MRR = new MRR + expansion MRR minus churned MRR.
ARR (Annual Recurring Revenue)
ARR is MRR multiplied by 12. It is the headline growth metric for investor conversations and board reporting. Only contracted, recurring revenue counts -- one-time professional services fees and variable usage overages are typically excluded.
ACV (Annual Contract Value)
ACV is the average annual value of a customer contract, calculated as ARR divided by the number of active customers. Rising ACV signals movement upmarket; falling ACV signals SMB churn or downgrade pressure.
Growth and retention metrics
NRR (Net Revenue Retention)
NRR measures whether existing customers are paying more or less than they were 12 months ago. Formula: (starting MRR + expansion - contraction - churn) / starting MRR x 100. Above 100% means the existing base grows without any new sales. Best-in-class SaaS companies achieve 120-140% NRR.
GRR (Gross Revenue Retention)
GRR measures how much recurring revenue is retained without counting expansion. It is capped at 100% because expansion is excluded. Formula: (starting MRR - churn - contraction) / starting MRR x 100. Benchmark: above 85% for SMB SaaS, above 90% for enterprise SaaS.
Churn rate
Churn rate is the percentage of customers (logo churn) or revenue (revenue churn) lost in a period. Monthly logo churn below 1% is good for B2B SaaS targeting SMBs; below 0.5% is excellent. Enterprise SaaS typically measures churn annually, where 5-10% is the typical range.
Efficiency metrics
CAC (Customer Acquisition Cost)
CAC is the total cost of sales and marketing divided by the number of new customers acquired in that period. It should include fully-loaded salaries, tool costs, agency fees, ad spend, and events. Blended CAC mixes all channels; channel-specific CAC reveals which channels are most efficient.
LTV (Customer Lifetime Value)
LTV is the average total revenue a customer generates over their entire relationship with the company. Simple formula: ARPU (average revenue per user per month) divided by monthly churn rate. A company charging INR 50,000 per month with 2% monthly churn has an LTV of INR 25 lakh.
LTV:CAC ratio
The LTV:CAC ratio measures whether you are spending an efficient amount to acquire customers. A ratio of 3:1 is the standard benchmark -- for every rupee spent acquiring a customer, you should generate three rupees in lifetime value. Below 3:1 means overspending on acquisition or undercharging for the product.
CAC payback period
CAC payback period is how many months it takes to recover your acquisition cost from gross margin. Formula: CAC divided by (ARPU x gross margin percentage). Under 12 months is best-in-class for SMB SaaS; under 24 months is healthy for mid-market; enterprise can tolerate up to 36 months given higher ACVs.
Engagement metrics
DAU/MAU ratio
The DAU/MAU (Daily Active Users to Monthly Active Users) ratio measures product stickiness. A ratio of 20% or higher signals strong daily habit formation. It matters in B2B SaaS because low engagement predicts churn before the renewal conversation even starts.
SaaS metric benchmarks at a glance
- NRR: above 100% is good; above 120% is best-in-class
- GRR: above 85% for SMB SaaS; above 90% for enterprise
- Monthly churn: below 1% for SMB; below 0.5% for enterprise
- LTV:CAC: 3:1 minimum; 5:1 or higher is strong
- CAC payback: under 18 months is healthy for mid-market
- Gross margin: 70-80%+ is typical for SaaS (no manufacturing COGS)
SaaS metrics in the Indian context
Indian SaaS companies selling globally (Freshworks, Zoho, Chargebee) use ARR and NRR as primary growth signals, matching international investor expectations. Domestic-focused SaaS businesses often track MRR more closely because contract lengths are shorter and renewals are more frequent. The SaaS Capital Index and Bessemer cloud benchmarks are widely referenced by Indian SaaS founders.
Frequently asked questions
- What is the most important SaaS metric?
- NRR (Net Revenue Retention) is often cited as the single most important metric because it shows whether the existing customer base is growing or shrinking. A company with 120% NRR grows even if it stops acquiring new customers entirely.
- What is a good NRR for SaaS?
- Above 100% means you grow revenue from existing customers without adding new ones. Best-in-class SaaS businesses achieve 120-140% NRR. Below 90% signals serious retention or expansion problems that new customer acquisition cannot solve alone.
- How is MRR different from revenue?
- MRR counts only contracted recurring subscription revenue normalised to one month. One-time fees, professional services, and variable usage charges are typically excluded. Total GAAP revenue includes these, which is why MRR and reported revenue often differ significantly.
- What is churn in SaaS?
- Churn is the rate at which customers cancel or fail to renew. Logo churn counts the number of customers lost; revenue churn counts the MRR lost. Monthly logo churn below 1% is good for B2B SaaS targeting SMBs; enterprise SaaS typically measures churn on an annual basis.