The key B2B-SaaS metrics every start-up should track

Jul 10, 2018 · 9 min read

When we started a due diligence (at least one call with a founder) in the last 5 years we experienced that many young companies/founders do not prioritize tracking their most important B2B SaaS KPIs in a useful and insightful way. This, however, hinders a good management of the company as well as a fruitful and smooth exchange with potential investors at a later stage. Thus, we would like to give some insights into what we think are the most important KPIs every young B2B SaaS company should start tracking as soon as revenue streams arise from first customers. This allows a good understanding of the own business model, gives insights on how to improve sales and saves a lot of work before or during fundraising. Investors also like to see historic numbers — thus, we suggest starting early.


An important KPI describing the stage of a B2B SaaS company is surely its monthly recurring revenue (MRR) being the sum of the total recurring licence revenue normalized (i.e. deferred) into a monthly account. Although this seems to be a no-brainer there are a few details we would like to highlight. It’s important that the MRR only includes software-related license revenues. Other revenue streams (pilots, PoCs, one-time payments, services, onboarding, consulting, …) even if they might have a recurring character (like service revenues sometimes) are not included in this KPI and should be reported separately.

It’s also enlightening and avoids reporting confusion to track and report both, signed/contracted/committed MRR (sometimes referred to as CMRR, for a signed contract) as well as invoiced MRR (IMRR). Especially for companies with long onboarding times CMRR is an important KPI in order to correctly assess sales reps performance and observe future cash streams. We suggest either reporting both (IMRR and CMRR) or highlighting what is reported, since with long onboarding times and strong growth both KPIs might deviate strongly.

You should also reflect contracted churn (e.g. a customer doesn’t renew a license that ends in 3 months) or upsells that you already know of.

The MRR growth (Net New MRR) is the difference between MRRs. It’s an important KPI but might be misleading if reported independently since it incorporates new customers, upgrades/upsells, downgrades and churns (compare Figure 1 blue line). It thus aggregates lost as well as gained revenue. Hence, it’s useful to also track the Gross New MRR (sum of new MRR and upsell, green in Figure 1) as it gives you better insights on the overall sales performance.

The historic and actual total MRR is the KPI most investors are interested in. We suggest either tracking and plotting it in 2 separate graphs (new MRR and total MRR) or merge both information as e.g. shown in Figure 2.

Many companies also report an ARR. In a B2B SaaS business model only license fees are included, so if you use this metric be sure to calculate it by ARR = 12xMRR. However, keep in mind, that this metric doesn’t give you insights on last or next year’s performance since it doesn’t incorporate growth or churn.

Some companies also report an ACV (annual contract value), which is calculated as the total contract value of a customer normalized into a yearly account. It is a useful metric on a customer basis as well as averaged over all customers, since it informs you about the per customer earnings in one year. However, there is again no real definition, which often leads to confusion. Some companies include non-recurring fees, some don’t. We suggest reporting the ACV as the (average) contract value including all revenue streams, normalized into one year. For contracts larger than one year, the first years ACV might be higher, since one-time fees presumably only occur in the first year.

The TCV is the total contract value of a customer including recurring license fees and all non-recurring fees. Here is one example:

Customer A has a 3 year contract of 36k€ software license fee, 1k€ onboarding fee, 3k€ consulting fee in the first year

TCV= 36k€ + 1k€ + 3k€ = 40k€

ARR=36k€/3 = 12k€

MRR = ARR/12 = 1k€

ACV (first year) = 12k€ + 1k€ + 3k€ = 16k€

ACV (second&third year) = ARR

The customer life time value (LTV or CLTV) is also an important KPI to track. It sums the amount of revenues that you can expect from one customer during its engagement with the company. This is especially important when you expect customers to engage longer than the minimum contract length, else the LTV equals TCV.

In order to prevent confusion, we suggest reporting MRR (rather than ARR), contract lengths, and other revenue streams separately, as mentioned above.

Churn Rates

Another important SaaS KPI is the churn rate — both, logo (customers) and MRR churn. However, although being extremely important we experienced that this metric leads to most confusion. Without a detailed definition of your calculation the churn rate is not very valuable in our opinion.

Logo Churn — according to our experience companies calculate, report and understand the logo churn rate in different ways. The aforementioned difference between “contracted” churn (a customer cancelled its contract but might still be live) and live churn (a customer doesn’t pay any more) is as important to be aware of. Calculating live logo churn by dividing through all customers might lead to misleading results, since many customers are often not churnable — depending on the typical contract length of your business. E.g. if one out of hundred customers churned in a month you could easily report 1% monthly logo churn, however if only 5 customers were able to churn (due to contract terms) this number is misleading. You should better report 20% (cohort) logo churn as this number gives you a better proxy for possible future churns (and report your calculation in a footnote). Although for mature companies the monthly- and cohort churn rate should be roughly equal, they may differ significantly for high growth companies. Thus — especially for fast growing companies — it’s more enlightening and powerful to report churn rates based on cohorts.

See Figure 3 and Figure 4 for an example. A B2B SaaS company gained 100 and lost 20 customers in 10 months. The minimum contract length is 3 months. Some companies would report 3% average monthly logo churn. However, this calculation is misleading for this company as it’s not based on cohorts. See Figure 4 for a comparison calculation.

In the following table, the exact cohort calculation of the churn rate is shown below. The different calculations lead to completely different results (3% vs. 8% average monthly churn).

Another good way to track and report logo churn is in cohorts split over the lifetime as shown in Figure 4. With that, you gain information on the time most customer churn. This might help you improving your product and/or contract conditions as well as your customer success strategy. In this example you see, that most customers churn after 3 months, which is the minimum contract length. You can also see that the March cohort is worst.

Revenue Churn Rate — for the MRR churn calculation, you sum up the MRR of the churned customers and divide it by the sum of the MRR of all churnable customers. The calculations are similar to the aforementioned logo churn calculations. More enlightening (in combination with the aforementioned logo churn) however, is the net MRR churn, which includes up-sales and downgrades. It informs you how crucial the logo churn is, as a negative net MRR churn e.g. is a good indicator for a successful business model.

Burn & Cashflow Management

Another important KPI you should track and report as early as possible is your liquidity planning including burn and cash out date. Ideally these calculations are based on the operating KPIs like churn, ACV, sales metrics, headcount payments etc. In order to do so we strongly suggest building a comprehensive financial model including a plan for the next 2–4 years. This should always be driven by key inputs like marketing spending and conversions (for a more inbound sales approach) or by the amount of sales reps and quotas (for a more outbound sales approach). You can find a very good and detailed plan elaborated by our colleague Andi here:

Sales Pipeline, Funnel & Cycle

To get a good feeling of your next months’ growth you should also be aware of your sales pipeline and sales funnel. Both are important, and the difference is small but crucial. The sales pipeline gives you the value and the amount of deals at this reporting date at a specific stage (lead, qualification, …., until closing and implementation). It gives you insights on what deals you or your sales reps are working on and what the potential outcome of those deals is. You should always compare the pipeline with your targets from the financial model or ideally connect both in order to keep track and implement an early warning system if things don’t work out as expected.

The sales funnel gives you insights on the conversion rates of prospects at each pipeline stage. It is based on past actions and is thus always a cohort analysis. E.g. it can tell you how your conversions performed in the last year at each stage of the pipeline. It gives you good insights which steps to optimize within the sales process.

Lastly, track your sales cycle in days as it is a good indicator of how fast you can scale your business.

CAC & Payback

Another important metric you should track is the customer acquisition cost (CAC), being the sum of all sales and marketing spending (including salaries, bonuses, rent, cars etc.) divided by the number of new customers in a given time period. It’s the key metric of how valuable a customer should be to create a profitable business. It also allows you to calculate how long it will take to turn a customer breakeven when you subtract one-time revenues and divide it by the MRR (i.e. payback-time). The payback time should not drastically exceed 12 months (depending on retention) as your business growth else consumes too much capital. A good SaaS business model is driven by a CLTV that exceeds the CAC significantly (at least 3 times).

If you have a more inbound sales approach try to separately report CAC for paid and non-paid leads, as a blended metric might lead to confusion. E.g. if you have 10 paid leads that turn into 1 customer and 10 unpaid leads that turn into 2 customers, the blended conversion would be 15%. However, it’s more insightful to report both conversions separately (paid: 10%, unpaid, 20%). A reporting based on each marketing and sales channel is even more comprehensive if data is available.


First, we suggest founders to build a decent reporting which allows for tracking the aforementioned most important B2B SaaS KPIs. Second, build a decent financial plan which is driven by sales and/or marketing spending. This plan should optimally lead to the same KPIs so you can benchmark your progress and review your assumptions on a monthly basis. The goal is not to hit the plan 100%. Start-up reality is that you almost certainly will be above or below plan. But it is important to know when and where you deviate and what the short- and long-term deviations are. Also keep in mind your reporting needs and how you can create these as efficiently as possible.

However, there is no right or wrong and there are no fixed definitions on B2B SaaS KPIS.

Whatever you track, make sure to later present it in an easy to understand and favourable way to prevent confusion. A good way to do so is by defining your KPI calculations, e.g. in a footnote of the investors presentation.

If you don’t want to track everything manually (in excel) there are some good tools out there to help you out, e.g.,,, or This might simplify your reporting efforts drastically and the communication with (potential) investors, since most KPIs are already tracked, calculated and continuously updated.

If you have any comments or you are even building an amazing SaaS start-up: we would love to hear from you at pitch at senovo dot vc!


We're a European early stage VC Fund focused on B2B SaaS…