Welcome to another edition of SaaS Metrics School with Ben Murray, The SaaS CFO! In today’s episode, we’re exploring the crucial SaaS metrics you need to monitor as your company reaches and surpasses $10 million in Annual Recurring Revenue (ARR). Whether you’re rapidly scaling or have your sights set on achieving that milestone, understanding the metrics that matter most is essential for sustainable growth and operational excellence.

The Importance of SaaS Metrics at $10 Million ARR

Reaching the $10 million ARR mark is a significant milestone in the growth of any SaaS company. At this stage, the metrics that were sufficient during your startup phase may no longer provide the comprehensive insight you need. That’s why it’s vital to have a framework that helps you understand and implement key SaaS metrics to evaluate your business’s health and guide strategic decisions.

The Five-Pillar SaaS Metrics Framework

To assist SaaS leaders in navigating these complexities, I’ve developed a Five-Pillar SaaS Metrics Framework. This framework serves as a roadmap for implementing the right metrics to monitor your business’s performance, assess profitability, and drive growth. Here’s a brief overview of each pillar:

Pillar 1: Growth

Growth is the first pillar of the SaaS Metrics Framework and focuses on understanding where your new and expansion revenue is coming from. You need to keep track of customer counts, Monthly Recurring Revenue (MRR), and Annual Recurring Revenue (ARR). Key metrics include:

- MRR growth rate
- New MRR vs. expansion MRR
- Customer acquisition metrics

Pillar 2: Retention

Retention is just as crucial as growth. After acquiring and expanding your customer base, you must evaluate how well you are retaining them. This is measured through:

- Customer retention rate
- Gross Revenue Retention (GRR)
- Net Revenue Retention (NRR)

Understanding your retention profile helps in identifying customer satisfaction levels and ensuring that your growth is sustainable.

Pillar 3: Gross Profit

Gross profit is an essential part of understanding the efficiency of your revenue streams. At $10 million ARR and beyond, breaking down gross margins by revenue stream is vital to understanding the profitability of different segments of your business. Metrics to consider include:

- Gross profit margin
- Cost of Goods Sold (COGS)
- Contribution margin by revenue stream

Pillar 4: Financial Profile

Your financial profile gives you a complete view of your company’s financial health. The Rule of 40 is a popular metric for assessing the balance between growth and profitability, while other important considerations include:

- Operating expenses (OPEX) as a percentage of revenue
- EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
- Free cash flow

This pillar is essential not just for your internal strategic planning but also for investor and board-level discussions.

Pillar 5: Efficiency

Efficiency metrics measure how well your company is using its resources. These include sales and marketing efficiency as well as organizational efficiency, which is critical for charting your path to profitability. Key efficiency metrics include:

- Customer Acquisition Cost (CAC)
- CAC Payback Period
- Sales efficiency ratio

The Four Key SaaS Data Sources

Implementing these metrics accurately requires data from multiple sources. Here are the four essential data sources you need:

1. Financial Data: Your financial statements and general ledger data.
2 . 3Bookings Data: Includes all customer contracts and new bookings information.
3. Payroll/HRIS Data: This data helps in tracking employee costs and allocation.
4. Customer/Revenue Data: Detailed information on customer behavior and revenue trends.

Why Accurate SaaS Metrics Are Challenging

One reason why building and maintaining SaaS metrics is challenging is due to the multiple data sources required. Each data source brings its own set of nuances, making it complex to ensure accuracy and consistency. This is why it’s essential to adopt a comprehensive framework like the Five-Pillar SaaS Metrics Framework to streamline your metrics tracking.

Download the SaaS Metrics Framework

For a detailed guide to implementing these pillars and more, download my Five-Pillar SaaS Metrics Framework . This framework will help you create accurate and repeatable metrics, providing insights that are not only valuable for your internal teams but also for potential investors and board members.

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