The SaaS Metrics That Matter

Summary

A comprehensive reference framework for SaaS metrics from David Sacks (Craft Ventures). This is less a mental model and more a metrics dictionary, but the organizing principle is clear: growth must be efficient and sustainable, and you need the right metrics to distinguish real growth from "fake" growth fueled by uneconomic spending.

Revenue metrics:

• ARR/MRR: Only recurring revenue counts. One-time revenue (services, pilots) is excluded. ARR = 12 x MRR.
• CMGR (Compound Monthly Growth Rate): Normalizes lumpy month-over-month growth. Target: 15%+ below $1M ARR, 10%+ above $1M ARR. 10% CMGR equals ~3x year-over-year growth.
• MRR Components: Retained, Expansion, New Sales, Resurrected, Contraction, Churned. This decomposition reveals the health under the topline number.

Retention metrics:

• Dollar Retention / NRR: Revenue from a cohort vs. its original size. Best SaaS companies hit 120%+ annually. Below 100% = leaky bucket.
• Logo Retention: Percent of customers retained. Benchmarks: 90-95% enterprise, 85% mid-market, 70-80% SMB. Dollar retention matters more.
• Customer Concentration: Red flag if one or two customers dominate revenue. Target: largest customer < 10% of revenue.

Sales efficiency metrics:

• CAC: S&M expense in prior period / new customers in current period (lag accounts for sales cycle).
• ACV:CAC: Annual contract value should exceed acquisition cost.
• CAC Payback: S&M spend / (MRR x Gross Margin). Measures months to break even.
• Magic Number: Net New ARR / prior-period S&M. Target > 1.
• Burn Multiple: Net Burn / Net New ARR. Below 1 is excellent; below 2 is good.

Engagement metrics:

• DAU/MAU: Target 40% on weekdays (users visit ~2x/week).
• DAU/WAU: Target 60% on weekdays (users visit ~3 out of 5 days).
• Paid Engagement: Filter out free users for clearer signal.

Other:

• Gross Margin: Target 75%+ for pure SaaS. Persistently low margins may indicate a "Mechanical Turk" problem (humans performing product capabilities).
• LTV: Cumulative gross profit net of CAC. Healthy cohorts cross $0 before month 12, grow to 3x CAC over time.

Relevance to projects:

• [[01-projects/data-marketplace/index]] -- These metrics define what "good" looks like. NRR > 100% means the marketplace is expanding within accounts. Customer concentration is a real risk in a niche data marketplace. Track MRR components from day one.
• [[01-projects/squarely-puzzles/index]] -- DAU/MAU and paid engagement are the relevant engagement metrics for a puzzle app. CAC payback matters for any paid acquisition (App Store ads).
• [[01-projects/phdata/index]] -- Consulting doesn't map cleanly to SaaS metrics, but the customer concentration risk is real. The "Mechanical Turk" test is interesting: is the consulting business selling software-like outcomes but delivering them with humans?
• [[01-projects/newsletter/index]] -- DAU/MAU equivalent: open rate and click rate. Sponsorship revenue is not recurring in the SaaS sense but could be measured with similar retention/expansion concepts (sponsor retention, ARPS expansion).

Connects to [[06-reference/2026-04-03-b2b-saas-pricing-masterclass]] on value metrics and monetization. The CMGR benchmarks connect to [[06-reference/2026-04-03-nathan-barry-saas-scaling-profit-sharing]] on ConvertKit's growth trajectory. The burn multiple concept connects to [[06-reference/2026-04-03-ladders-of-wealth-creation]] -- bootstrapped businesses implicitly have a burn multiple near zero.

Open Questions

• What does a "SaaS metrics dashboard" look like for [[01-projects/data-marketplace/index]] at the $0-$10K MRR stage? Which metrics matter before product-market fit?
• How do you adapt the Magic Number and CAC Payback for a business with both consulting revenue ([[01-projects/phdata/index]]) and product revenue ([[01-projects/data-marketplace/index]])?
• The 120% NRR benchmark assumes expansion revenue -- what product mechanisms drive expansion in a data marketplace?