15 Essential SaaS Business Metrics Every Technical Professional Should Understand

1. Customer Acquisition

Customer acquisition (获客) is a complex process where businesses aim to obtain high‑quality leads at the lowest possible cost. The article introduces SEM (Search Engine Marketing) and distinguishes it from SEO, then lists common advertising cost metrics such as CPA, CPC, CPS, CPD, CPT, CPM, CTR, and CVR.

1.1 SEM

SEM encompasses any strategy that increases website visibility via search engines, including both organic SEO and paid PPC advertising. SEO focuses on natural traffic, while SEM includes both natural and paid sources.

1.2 CAC

Customer Acquisition Cost (CAC) is calculated as total cost divided by the number of acquired customers. Monitoring CAC alongside LTV helps assess the sustainability of SaaS acquisition strategies.

1.3 MQL / SQL / Opportunity

The article defines Marketing Qualified Lead (MQL), Sales Qualified Lead (SQL), and Opportunity, explaining the qualification criteria (budget, authority, need, timeline) and the funnel progression from MQL → SQL → Opportunity.

2. Retention and Activation

Retention and activation are key indicators of product success, closely related to NPS, DAU/MAU, and retention rates.

2.1 NPS

Net Promoter Score (NPS) measures customer loyalty by asking how likely users are to recommend the product. It is calculated as the percentage of promoters minus the percentage of detractors.

2.2 DAU / MAU

Daily Active Users (DAU) and Monthly Active Users (MAU) quantify active user counts. The DAU/MAU ratio (sticky ratio) indicates how frequently users engage with the product.

2.3 Retention Rate

Retention Rate measures the proportion of users who remain active after a given period (Day‑1, Day‑7, Day‑30, etc.). It is calculated as (active users at end of period ÷ active users at start) × 100%.

3. Revenue

Revenue is the lifeblood of SaaS companies, typically generated through subscription models.

3.1 MRR

Monthly Recurring Revenue (MRR) aggregates the monthly subscription fees of all customers. Example: 2 customers paying ¥300 each yields MRR = ¥600.

3.2 ARR

Annual Recurring Revenue (ARR) extrapolates MRR to a yearly figure and is used for strategic planning and valuation.

3.3 LTV

Lifetime Value (LTV) estimates the total revenue a customer will generate over their relationship with the company. Basic formula: LTV = Average Revenue per Customer × Average Customer Lifespan. A more detailed model incorporates gross margin and churn rate: LTV = ARPA × Gross Margin ÷ Churn Rate.

3.4 NDR

Net Dollar Retention (NDR) measures revenue growth from existing customers, excluding new sales. It is calculated as (Current period MRR from existing customers ÷ Prior period MRR from those customers). A high NDR indicates strong upsell and renewal performance.

3.5 ARPU

Average Revenue Per User (ARPU) = Total Revenue ÷ Total Users, providing insight into per‑user monetization.

4. Product Development Stages

4.1 Product‑Market Fit (PMF)

PMF, derived from "Crossing the Chasm," signifies that a product delivers real value to a clearly defined target market and generates sustainable revenue. Indicators include validated customer demand, clear buyer personas, best‑practice case studies, market size estimation, unit economics, and a proven go‑to‑market (GTM) path.

4.2 GTM

Go‑to‑Market (GTM) strategy outlines how a product is introduced to the market, covering target customers, pricing, sales channels, and marketing plans. Successful GTM requires an established PMF, continuous monitoring of LTV/CAC ratios, and maintaining system stability during scaling.

5. Other Growth Models

5.1 PLG (Product‑Led Growth)

PLG relies on the product’s intrinsic value to drive acquisition, expansion, and retention. Typical steps include delivering high‑quality product experiences, offering frictionless free tiers, enabling viral sharing, data‑driven optimization, self‑service upgrades, and systematic customer feedback loops. PLG is especially suited for SaaS, consumer apps, and developer tools.

5.2 SLG (Sales‑Led Growth)

SLG focuses on a direct sales effort to acquire and grow customers, ideal for high‑value enterprise solutions, new market entry, relationship‑driven industries, and complex, non‑self‑service products. While SLG can achieve deep customer relationships, it may limit scalability and increase costs compared to PLG.

6. Closing Remarks

The author cites Feng Tang’s advice that mastering 100 key SaaS terms can make one an expert in the field, encouraging technical professionals to study these metrics to accelerate their SaaS entrepreneurship.