But here’s the catch: the metrics that matter most? They change as your business grows. So, if you’ve ever found yourself wondering what to focus on now vs in six months, you’re not alone – and we’ve got you at every step of the journey. 

Welcome to our new series breaking down exactly what metrics to watch at every stage of your SaaS journey. In our first article of the series we have a brief overview: a stage-by-stage guide to what numbers actually matter, and why. Then over the next few articles, we’ll break each one of these down and dig into how they’re calculated, and what makes a good benchmark. 

Here’s a handy picture to keep us on track for the journey ahead:

And remember, if you’re supporting your growth through capital raising (as is likely), as soon as you close one round you’ll want to start paying attention to the metrics that will matter to your next stage investor. So let’s go!

The early stage: Pre-seed to seed metrics

AKA the scrappy startup phase. You’re figuring things out, testing your idea, getting early traction and trying to get people to simply care. At this point metrics are less about performance and more about signs that you’re on the right track.

Metrics that matter now:

• New logos/bookings: these earliest metrics are simply the number and dollar amount of your first customers – a huge milestone!
• Burn rate/runway: how much are you spending each month, and how long before you run out of cash? Stay on top of this!
• MRR/ARR (monthly/annual recurring revenue): even a small amount of recurring revenue shows that people are willing to pay for your product 
• Churn: if early users keep leaving, something’s not clicking, so use this as feedback to tweak your product-market fit
• CAC (customer acquisition cost) ideally you want this as low as possible, think scrappy marketing, not big ad budgets

You’ll also need to start thinking about some of the underlying accounting you’ll need around this for unearned (or deferred) revenue, and revenue recognition. At this early stage it’s about showing that you’re starting to pay attention to these metrics – they won’t be perfect by a long shot. As well as a bit of accounting, you’re going to spend a fair amount of time talking about making sure you’re collecting the right data behind the metrics.

Growth stage: Series A

People want what you’re selling (yay!), and keep wanting it (retention), and now it’s time to grow. Here, it’s all about scaling smart and building a customer base that sticks around.

Metrics that matter now:

• Logo retention: how many (by quantity) customers are you keeping when they’re due to renew their subscription?
• Dollar retention: how much recurring revenue are you retaining at renewal?
• ARR growth: is your revenue going up? You want a clear, steady climb
• LTV (life time value): Start tracking how much value your customers bring in over time, it helps you understand who your key customers are
• CAC payback: how long does it take to earn back what you spent to get a customer? Hint: the faster, the better

Oh, and you’ll still be refining the prior stage metrics – increasing the quality of the data and the sophistication of your analysis, and the actions you’re taking from them. At each stage your set of metrics will deepen and expand.

Scaling & expansion stage: Series B

You’ve got a team, maybe you’re in a few markets, and the focus shifts to being efficient and predictable. You’re not just growing, you’re managing growth.

Metrics that matter now:

• Gross margin: you want to keep this high (70%+ is a good target), so you’ve got enough wiggle room to scale without going broke
• Burn multiple: how much cash are you spending to generate each dollar of annual recurring revenue (ARR)? A low or improving number shows increasingly efficient growth
• ARR/employee: as your team grows, you want to know that each new hire is contributing to overall revenue
• Pipeline metrics: showcasing your ability to generate and close deals efficiently, this is normally driven and managed by your sales teams. Think pipeline coverage, annual contract values, and of course, sales conversion

Later stage: Tools to help you manage subscriptions and your metrics as you grow

Now you’re thinking about managing things as a business, not “just” as a scaleup. While there’s still a few (additional) scaleup-specific metrics, you’re now in the realm of more traditional business ratios. And as you’re starting to think about attracting higher end investors or even an exit, this is where the numbers really have to shine, and everything needs to look sharp.

Metrics that matter now:

• Rule of 40: add your growth rate and profit margin, if it’s 40% or higher, you’re in a solid position
• Magic number: this tells you how efficiently you’re turning sales and marketing spend into revenue, over 0.75? You’re in good shape
• Utilisation: how effectively your available resources are being used, especially in relation to billable work
• R&D/S&M/G&A as % of revenue: these should be exact, investors want to know you’re getting strong returns
• EBITDA: time to start thinking like a grown-up business. These numbers will help you keep things sustainable – and make your business attractive to investors or acquirers

What’s next?

Remember there’s no single ‘magic metric’ that works at every stage. What matters when you’re just starting out isn’t what matters when you’re looking to exit. The key is knowing where you are in the journey and focusing on the right numbers for that stage.

We’ll be breaking all of this down in future articles, so stick around! And if you’ve got questions or want help figuring out where you’re at, get in touch. We’ve got your back.