SaaS Growth Metrics: What To Track At Each Stage

Both acquisition and activation are key SaaS metrics for tracking how many new customers you're onboarding and how much revenue you're generating from them. Acquisition metrics carry more weight as ISV teams acquire more customers and position themselves for scale. For example, in seed funding, you have very little data to work with. Hence, knowing that you’re converting from ads, SEO, or social is sufficient.

A healthy trial-to-conversion rate is a useful metric. However, when you’re pitching in Series A, you need to know which channel provides customers who tend to spend more after they experience the first value. Similarly, channel-level attribution becomes increasingly granular in subsequent funding rounds.

Here are some relevant acquisition metrics across SaaS stages. 

• Seed: You manually track sign-ups and activation against a baseline.
• Series A: You attribute acquisition and attribution to respective channels. This allows you to measure the cost spent per channel and its returns.
  

• Series B: You factor in customer retention rates across channels and segments, which are more important metrics for investors. With proper attribution, you can reduce marketing expenses on channels that don’t perform.
• Series C+: You measure metrics like pipeline coverage ratio, payback period, and product-level activation. This allows you to calculate predictable revenue more confidently.

Most SaaS businesses start by manually tracking acquisition and activation metrics. The challenge is transitioning to attribution-based telemetry once product-market fit has been validated. Without that, it’s difficult to correlate activation activities across channels that are pivotal to the customer acquisition strategy.

• Which acquisition source yields the highest Average Revenue Per User (ARPU) in the first 6 months?
• Is there a correlation between acquisition channel and time-to-value?● At what scale does our primary acquisition channel hit a ceiling before the CAC becomes unsustainable?

Provisioning for attribution tagging early in development can avoid costly retrofitting later. Using Amazon Glue and Amazon Athena, you can join CRM and product data using attributable tags. Then, you use Amazon QuickSight to visualize cohort-level SaaS metrics on a dashboard. These measures position your ISV team to protect your product margin, reinvest profits in market expansion, and optimize infrastructure spending.

Acquiring customers validates your SaaS model, and retaining them is necessary for sustainable growth and profitability. However, the methods you use to track acquisition will determine if you’re measuring retention metrics correctly. For example, if you’re only tracking blended customer churn rate, you’ll only know that you’re losing customers or revenue, not why customer satisfaction drops.

Transitioning from blended metrics to tenant-level retention data is a core milestone of your SaaS Transformation. Once you map these environments cleanly, you unlock the ability to sell where your customers already build. You can join the AWS ISV Accelerate Program to unlock co-sell opportunities and accelerate sales cycles by 40%.

Retention is the percentage of customers that are retained over a period of time. Meanwhile, churn is the inverse of retention, measuring customer attrition. Generally, ISV builders measure logo (or account) and revenue churn.

• Logo churn considers the number of accounts or organizations that cancel their subscriptions.
• Revenue churn tracks decreased spending amongst paying customers, such as plan downgrades, a reduction in seats, or cancellations.

While both the logo and revenue churn rates help assess customer retention, they carry different implications for business growth. For example, losing 9 tenants with a customer Lifetime Value (LTV) of $100 has a lesser impact on recurring revenue than an enterprise client spending $10,000 annually.

Just like acquisition metrics, the degree of segmentation of churn analysis becomes more targeted across SaaS growth stages.

• Seed: You aggregate monthly churns and perform exit interviews to surface reasons why customers leave.
• Series A: You segment churn across different cohorts. Additionally, churn is further distributed against logo and revenue. It shows where you're experiencing customer drop-off, revenue loss, or both.
  

• Series B: Retention and churn analysis is segmented more granularly across customer profile, pricing tier, products, onboarding paths, and more. This allows you to identify which acquisition channels, demographics, and product plans led to higher churn.
• Series C+: With expansion in mind, you’re more concerned with predicting retention with metrics like NRR, logo retention, and monetary retention. Instead of knowing how many customers are retained, investors want metrics that forecast future revenue growth.

There is no doubt that churn analysis is important, but only if it is stacked upon properly segmented cohort retention. This means implementing a cohort split at Series A to effectively measure NRR at Series B, to help to explain why your SaaS is on a growth or shrinking trajectory.

• How does the retention curve of your lower-tier accounts compare to your higher-tier accounts over a 12-month period?
• Can you show the gross margin per tenant for your top 10% of customers?
• Is your expansion revenue coming from seat growth or feature upsells?

When trying to convince investors that your ISV engineering team is on track for profitable growth, you need to provide the right SaaS metrics. Besides Annual Recurring Revenue (ARR), Net Revenue Retention (NRR) is one of the most important revenue metrics that investors look for as founders seek funding. More importantly, high NRR proves strong customer expansion.

By definition, NRR projects the revenue expansion from existing customers. It considers the expansion of Monthly Recurring Revenue (MRR), contraction MRR, and churn MRR alongside the baseline MRR. NRR is measured against the start of an MRR cohort. A healthy NRR score above 100% means existing customers are spending more on your SaaS products.

Meanwhile, an NRR below 100% means that you’re losing revenue from your customer base.

Here’s how NRR becomes a more critical signal in SaaS stages.

• Seed: Instead of NRR, you track general revenue expansion because of limited data to work with.
• Series A: You track blended NRR to understand your product’s growth and realized value. At this point, NRR is directional rather than causal.

• Series B: You factor in the customer profile, pricing tier, and products to get a more confident NRR score.

• Series C+: You’re more concerned about NRR as a predictive indicator. By segmenting it across customers, you can use NRR to accurately measure the expansion trigger. For example, your software automatically upsells premium features once they’ve hit a certain spending threshold.

NRR benchmarks vary across industries, product values, and growth stages. B2B SaaS generally has a higher NRR than B2C SaaS companies. SaaS with a higher Annual Contract Value (ACV) also tends to feature higher NRR. However, NRR is only interpretable when backed by properly attributed retention metrics. For example, if you fail to instrument expansion and contraction metrics by cohort, your net retention rate is limited to churn rate.

• What percentage of your expansion revenue is self-serve versus sales-assisted?
• Can you segment NRR by customer vertical to show where you have the strongest moat?
• If you increased the price of middle-tier customers by 15% tomorrow, how would that impact the NRR?

All SaaS companies aspire to be profitable in the long term, which means knowing the unit economics in real time. Specifically, know the LTV:CAC ratio, CAC payback period, and gross margin.

• Lifetime value (LTV) is the total spending a customer will make during their subscription.
• Customer acquisition cost (CAC) is the cost of acquiring a customer through sales and marketing efforts.
• The LTV:CAC ratio compares the two metrics; a healthy target ratio is 3:1 considering running costs.
• CAC payback period is the time required to recoup the investment for acquiring a customer.
• Gross margin is the percentage of revenue minus the cost of goods sold.

These metrics will be derived from the same cohorts that produce your retention and revenue data. This means that NRR must be segmented to provide an accurate LTV to understand which customer segment is profitable. Just as with retention metrics, investors prioritize unit economics differently across SaaS growth stages. Both demonstrate how ISV engineers protect cost margin as they build towards market expansion.

• Seed: CAC, gross margin, and payback period are often estimated. They serve as directional indicators.
• Series A: You attribute unit economics by channel. This allows you to track LTV:CAC across customer profiles.
  

• Series B: You tag gross margin, CAC payback, and LTV to tenants, pricing, and products.
• Series C+: Cost and revenue attribution is further narrowed down to the specific features, workload types, and customer segments.

Generally, SaaS companies aim to achieve a minimum 3:1 ratio of LTV:CAC. It’s important to keep in mind that a high LTV:CAC ratio doesn’t necessarily mean a SaaS company is highly profitable. For example, you might get a 6:1 ratio, but after analyzing the underlying cost data, you might find that you’re not spending enough on marketing and expansion. Learn how the AWS Well-Architected Cost Pillar helps you optimize cloud spend and predict SaaS spending as you scale.

ISV Architecture Readiness Checkpoint

• What is your cost of goods sold (COGS) breakdown between cloud compute, storage, and third-party API egress?
• If you stripped away your top three largest accounts, what would your blended gross margin look like?
• How much idle resources are currently contributing to your monthly burn?

Fast-growing ISVs compound SaaS metrics to expedite the sales cycle, with a SaaS product that delivers predictable financial indicators. Remember, each metric is compounded from a proper cohort distribution.

• Tagging acquisition enables tenant-level retention data, leading to segmented NRR.
• Accurate revenue prediction then leads to precise LTV and, subsequently, unit economics that instill investor confidence.

If you overlook any of the sequence, you risk producing hollow numbers that invite more questions than answers.

AWS Well-Architected Cost Optimization Pillar helps you measure architecture spend, manage resources, and optimize operational costs when building on AWS. By structuring your telemetry with established design principles, you can accurately attribute resource usage and scale sustainability. Then, participate in the AWS ISV Accelerate Program to use co-selling opportunities through AWS Marketplace, potentially landing 4-5x larger deals.

ISVs that scale profitably stack the right metrics so they compound.

Explore the AWS Well-Architected Cost Optimization Pillar to baseline your SaaS cloud costs for global opportunities.