6 metrics for your saas startup

Whether you have your own saas business or work as product manager of cloud-based solutions; at some point, you've probably felt overwhelmed by the infinite number of metrics to control your business.

Throughout this post I want to guide you through the most basic saas startup metrics that guarantees your success at every validation stage of your startup. There are two reasons behind this

1. Gain focus. When you spend your time and effort on few metrics, you focus on concrete problems that you need to solve to move your business forward.
2. Actionable data. Data is useless by itself unless there is an action plan behind each of your startup metric. Your job is at understanding how far you are from achieving your business goals.

Before product-market fit you have only one goal: learning as much as possible

Before product-market fit

You are at the beginning. There is no product. Maybe you have one but you aren't sure yet how this will resonate with your potential market. At this point, you have no idea who your customer is; however, you have your spreadsheet ready to measure new adds, disconnections, sales... ?error!

Before product-market fit there are two main metrics you have to follow

• Qualitative feedback. This is not exactly a metric, it's the most important data though. It's soon to measure the performance of a product nobody knows how will perform. Your task at this stage is simple (1) understand your customer's main need/problem, (2) find-out how they solve it nowadays and (3) test-with-out-sell how likely your product solves their pain.
• Product-market fit. How can we measure how far our business is from achieving product-market fit? The answer is by asking our customers how they felt in case they weren't able to use our products. 

After product-market fit

Your company is at that moment at which sales evolve and your customers portfolio starts to grow at good pace. Congratulations, you are at the growth stage and your main goals should be at (1) increase your service revenue and (2) keep your churn under control. What metrics should you focus at this stage?

• Monthly Recurring Revenue or MRR. This is the reference metric in saas business models and it amounts for the accumulative monthly sales from recurring subscriptions. Your business health is at risk if this metric does not grow.
• Churn. On one side you need to grow your revenues, on the other side you can't loose control of your disconnections. When you grow at 100 customers per month, a 10% churn does not look bad. However when your customer base is at 5000 customers and you still grow at the same pace, loosing 500 customers per month is a disaster.

Monthly Recurring Revenue is the metric of reference for any saas startup at growth

On the other side, you may find yourself at another stage beyond product-market fit. That stage at which your sales are not growing fast, your sales channels is stacked or even, your churn is pretty much under controlled. You are at the expansion stage and your objectives here should be at (1) accelerating your customers profitability before first 12 months and (2) reducing your costs per acquisition below 30% customer value.

At this stage, your metrics should be

• Customer Lifetime Value. How much earnings each customer is providing the company before churning?
• Customer Acquisition Costs. How much does it cost the company to acquire a customer per sales channel?

I will address these last metrics deeply in further posts.

CLTV over CAC ratio is the metric of biggest importance when measuring the performance of your business prior to an investment round

To sum up, either you work on your own saas startup or lead a cloud line of business, if you want to succeed it is of great importance to simplify your scorecard based on the stage your business is. From gaining feedback till measuring your customer's profitability, concentrate your effort on the metrics that are key at every stage.