SaaS KPIs: What Your Early-Stage Startup Should Actually Measure

In the early stages of your company, every choice can feel like a make-or-break decision. This pressure can push founders and other startup leaders to adopt one of two mindsets: the belief that with enough data, you can make perfect decisions or the notion that when overwhelmed by data, it's best to "trust your gut."

More Data Doesn’t Always Lead to Better Decision-Making. 

Nowhere is this data dilemma more visible than in a SaaS company, where endless amounts of data are accessible in near real-time. Instead of following the age-old adage "measure twice, cut once," leaders may start to advocate for "measure a thousand times and never cut," or possibly worse: "just start cutting."

If you have ever fallen victim to either of these mindsets, you're not alone. According to an Oracle report, 72% of business leaders admitted that the sheer volume of data and their lack of trust in it has "stopped them from making any decision." Meanwhile, 29% of business leaders reported giving up on data altogether and "relying solely on gut feelings."

72% of business leaders have admitted that the sheer volume of data and their lack of trust in data has “stopped them from making any decision”

Here’s the thing: Recording loads of data is easy, it's interpreting that data that successful decision-making hinges on. To accomplish that, you need to know what to focus your time and resources on in the first place. 

In this post, we discuss best practices for organizing data, how to communicate it effectively, and how to use it as a tool so everyone in your organization understands their relationship to each business goal.

The Difference Between KPIs, Metrics, and Benchmarks in a SaaS Startup. 

Understanding what different types of data are and what they do is essential for any SaaS startup leader. 

• Metrics are any data points or measurements you can track. While anything can be a metric, they only become meaningful when you measure them over time (week to week or month to month) to help you understand your KPIs.
• Key Performance Indicators (KPIs) can be single or aggregated data points that indicate meaningful trends and reflect the overall health of your business. Don't separate goals from KPIs since both assess the business’s trajectory. If your KPIs aren't goal-oriented, they aren't really key performance indicators.
• Benchmarks help you understand whether your KPI expectations are realistic within the context of your industry, location, economy, and other factors through comparison and contextualization.

A Practical Marketing Example:

The Right Number of KPIs? Fewer Than You Think. 

Entrepreneurs often get distracted trying to benchmark every metric, like whether their competitor has more followers than them on every social platform. This leads to high-energy, low-return efforts over stuff that no one cares about or makes a difference for the business.

So, how do you choose the right KPI for your business? Thinking about how you deal with data in your personal life can help reframe that choice. You make thousands of choices daily, using just a few key data points to influence your decisions. Humans are good at that, quickly sorting through data to focus on a narrow information set. But, when it comes to business, we often lose these data-sorting skills and allow analysis paralysis to creep in.

KPIs: Know the Classics and Which Ones Work for You.

You might have guessed that the most commonly used KPIs tracked by startups revolve around revenue. If you’re post MVP, you probably track them already with your team.

• Customer Acquisition Cost (CAC) helps companies understand how much money they spend to get a new customer in the door.
• Monthly Recurring Revenue (MRR) is a metric that shows the amount of income a company reliably makes — typically from subscriptions or contracts — every 30 days.
• Customer Churn is the rate at which customers stop using your product, resulting in their non-renewal of the subscription.
• Customer Lifetime Value (CLTV) represents the total revenue a business earns from customers throughout their relationship with your company.

Those KPIs offer invaluable insights into the health of any business and help refine overall strategy and communicate growth. Beyond the obvious ones, others can apply more specifically to early-stage SaaS startups. Some examples include:

• Lead Growth prospecting can be extremely tough in the early days and the ability to get early top-of-funnel momentum can be existential to your business. Tracking contact growth in your CRM month over month can be an indicator of how well you are setting up sales conversations
• Automation (as % of work) If you are transforming your business from service-based to SaaS or doing customer work manually, anticipating AI to take over that task, “True SaaS” can be a bit away. Rapidly getting to the point of full software on demand is necessary to avoid a scaling bottleneck and should be tracked until it's at 100%. 
• Time to Value (TTV) is how long it takes a new customer to realize the value of your product after the initial purchase. A shorter TTV means your product is "sticky" and can also indicate to investors that any problems your startup experiences aren't product-related, but have to do with a lack of funding for marketing/outreach. 

Communicating and Tracking Startup Growth Metrics with Your Team

Use these tips when communicating and tracking your growth metrics with your team so they stay focused and motivated. 

• Be consistent about what matters: Constantly changing KPIs isn't helpful. Benchmarking month-over-month, quarter-over-quarter, and year-over-year is critical to understanding how a business evolves.
• Review KPIs regularly: Review your KPIs more frequently than the occasional investor or board meeting. Schedule monthly, if not weekly, check-ins with team leads or managers to review your numbers.
• Adapt to investor requests: Guess what? Simply put, investors can be weird. Once you have them, you may have to track their favorite metrics and know them off-hand when you meet with them. 

Common Pitfalls to Avoid

• Trusting your gut (and only your gut): Many founders have deep knowledge of their fields and products. While this is great in and of itself, it can create a bias against adapting to signals from KPIs and metrics. Experience and intuition have their place, but don't rely solely on them.
• Trying to become a master of all metrics: In the early days of any startup, you have to wear many hats. But, as the company grows, delegating responsibilities is the only way to scale. Empowering your team to report on metrics and explain how that data affects your KPIs is necessary to avoid information bottlenecks and getting bogged down.
• Not seeing the big picture: Over-indexing on one metric is like missing the forest for a single tree. For example, a 10% drop in website traffic shouldn't be a cause for concern if website leads are still growing 5% month-over-month. The traffic metric alone doesn't reflect overall performance.

Bottom Line: Know Your Numbers

As an early-stage startup founder, you have to know your KPIs inside and out. These numbers are your roadmap for making well-informed decisions in any situation. If a crisis or time-sensitive opportunity arises, quick access to your metrics enables you to respond confidently and effectively and helps ensure continued growth. 

Lastly, numbers matter to investors because data can tell a compelling story. When it's time to raise money and pitch investors, being able to quote these figures instantly demonstrates that you understand your business and are on top of things. This is often the first step to building their trust and confidence in you.

Something that can help you with all of this is a well-defined template for tracking those metrics and KPIs. That's why we've built a simple yet effective template that streamlines your data analysis process and empowers you to make informed decisions that drive growth. Download it and see how much of a difference the template can make.