Complete Metrics Guide

SaaS Metrics That Matter for Exits

Buyers don't care about vanity metrics. Here are the 14 metrics that actually determine your valuation, with formulas, benchmarks, and red flags.

The Big 5 Metrics Buyers Care About Most

MRR/ARR

Revenue predictability

Growth Rate

Future potential

Churn Rate

Customer retention

LTV/CAC

Unit economics

Net Dollar Retention

Revenue expansion

Critical Metrics (Must-Haves)

These metrics make or break deals. Buyers will walk away if these aren't healthy.

Monthly Recurring Revenue (MRR)

Critical

The foundation of SaaS valuation. Predictable, recurring revenue from subscriptions.

Formula

Sum of all subscription revenue per month

Good Target

Consistent growth, 10%+ MoM

Red Flag

Declining or flat MRR

Annual Recurring Revenue (ARR)

Critical

Annualized version of MRR. Most valuations are calculated as a multiple of ARR.

Formula

MRR × 12

Good Target

$1M+ for acquisition interest

Red Flag

Inconsistent month-to-month

Revenue Growth Rate

Critical

How fast your revenue is growing. High-growth commands premium multiples.

Formula

(Current MRR - Previous MRR) / Previous MRR × 100

Good Target

20%+ monthly, 100%+ annually

Red Flag

<10% monthly growth

Churn Rate (Monthly)

Critical

Percentage of customers who cancel each month. Low churn = high retention.

Formula

(Customers Lost / Total Customers at Start) × 100

Good Target

<5% monthly, <3% ideal

Red Flag

>10% monthly churn

Net Dollar Retention (NDR)

Critical

Measures revenue expansion from existing customers including upsells and churn.

Formula

(Starting ARR + Expansion - Churn) / Starting ARR × 100

Good Target

>110%, ideally 120%+

Red Flag

<100% (losing money from cohort)

LTV/CAC Ratio

Critical

Return on customer acquisition investment. Shows unit economics health.

Formula

LTV / CAC

Good Target

3:1 or higher

Red Flag

<2:1 (unsustainable)

High Priority Metrics

These significantly impact valuation and buyer confidence.

Customer Acquisition Cost (CAC)

Total cost to acquire one new customer (sales + marketing expenses).

Formula: (Sales + Marketing Costs) / New Customers

Decreasing over time

Increasing CAC without LTV growth

Lifetime Value (LTV)

Total revenue expected from a customer over their lifetime.

Formula: (ARPU × Gross Margin) / Churn Rate

Growing over time

Declining LTV

Gross Margin

Revenue minus cost of delivering the service. SaaS should have high margins.

Formula: (Revenue - COGS) / Revenue × 100

70-80%+ for SaaS

<60% (indicates scaling issues)

Net Margin (EBITDA)

Profit after all expenses. Shows path to profitability.

Formula: (Revenue - All Expenses) / Revenue × 100

20%+ at scale, path to profitability

Negative with no path to positive

Customer Concentration

Percentage of revenue from largest customers. Diversification reduces risk.

Formula: Top 10 Customer Revenue / Total Revenue × 100

No single customer >10% of revenue

One customer >20-30% of revenue

Important Supporting Metrics

Payback Period

Time to recover customer acquisition costs through their revenue.

✓ <12 months

✗ >18 months

Revenue per Employee

Efficiency metric showing how well you leverage team resources.

✓ $150K+ per employee

✗ <$100K per employee

Magic Number

Sales efficiency metric showing return on sales & marketing spend.

✓ >0.75 (efficient growth)

✗ <0.5 (inefficient)

How These Metrics Affect Your Valuation Multiple

Metrics That Increase Multiples (+1-3x)

• Revenue growth >50% YoY
• NDR >120%
• Monthly churn <3%
• LTV/CAC ratio >5:1
• Gross margin >80%
• Magic Number >1.0

Metrics That Decrease Multiples (-1-2x)

• Revenue growth <20% YoY
• NDR <100%
• Monthly churn >7%
• LTV/CAC ratio <3:1
• Gross margin <60%
• Negative EBITDA with no path

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