11 years ago Marc Andreesen claimed that SaaS is eating the world.

One of the reasons SaaS companies are so attractive is how easy they are to measure.

Understand these 6 metrics and you can benchmark the performance of any SaaS company.

Metric #1: Pipeline conversion

The sales process is long and complex.

Pipeline conversion measures the percentage of sales opportunities converted to bookings. Refine this metric by stage and deal size to identify holes in the sales process.

Metric #2: LTV:CAC ratio

Is your product earning more from customers than it cost to acquire them?

The LTV:CAC ratio measures gross profit contribution against costs to acquire. The best companies achieve better than a 3x ratio.

Metric #3: MRR / ARR

The greatest feature of a SaaS company is the predictable nature of revenue.

Monthly recurring revenue, or MRR, measures the total monthly value of active subscriptions. ARR annualizes that number.

Metric #4: DAU / MAU

These days, user engagement is critical even for enterprise SaaS.

Daily to monthly average users ratio measures how often a typical user logs in.

Metric #5: Customer churn

What percentage of your customers are leaving the product every period?

For enterprise SaaS, 10% per year is strong. For a consumer product (like Netflix) that number might be 10% per month.

Metric #6: Dollar-based net retention

I believe net retention is the most important metric for a SaaS company.

DBNR measures the revenue of a cohort of customers relative to its initial size. Keeping this number above 100% proves you can replace lost revenue with upsells.