SaaS metrics every founder must track (MRR, LTV, CAC)
You cannot grow what you cannot measure. A simple guide to MRR, LTV, CAC, and the metrics that matter.
The SaaS Scorecard
We explain how to calculate and improve your LTV/CAC ratio and why MRR is only part of the story. Understanding these metrics is critical to building a sustainable business.
Monthly Recurring Revenue (MRR)
MRR is your baseline. Track new MRR, expansion MRR, contraction MRR, and churned MRR. Net MRR = New + Expansion - Contraction - Churn.
Customer Lifetime Value (LTV)
LTV = Average Revenue Per Account divided by Churn Rate. Aim for LTV 3x your CAC. Higher LTV provides more room for customer acquisition investment.
Customer Acquisition Cost (CAC)
CAC = Total Sales and Marketing Spend divided by New Customers Acquired. Include salaries, tools, and ad spend. Track CAC by channel for optimization.
LTV:CAC Ratio
This ratio determines your growth engine health. Below 1:1 means you are losing money. 3:1 is healthy. Above 5:1 may mean you are under-investing in growth.
Other Critical Metrics
Track: Gross Margin (should exceed 70%), Net Revenue Retention (above 100% indicates expansion revenue exceeds churn), and Payback Period (months to recover CAC).
Building Your Dashboard
Create a metrics dashboard updated daily. Share with your team. Set targets and track progress. Make decisions based on data, not intuition.
Sapterc Editorial Team
Expert insights on SaaS architecture and engineering.