Evaluate My SaaS

The small set that matters

• MRR & growth rate. The single number that tells you if the business exists. Care about the rate of change more than the absolute figure.
• Activation rate. Percent of signups who reach the aha moment. Under 25% is a leaky funnel; over 60% is rare and worth doubling down on.
• Cohort retention. Month-2 logo retention is the honest survival stat. Track by signup cohort, not aggregate.
• Net revenue retention. Existing customer $ this month vs same $ 12 months ago. Over 100% means the business grows even with zero new signups.
• Gross margin. Revenue minus cost of serving. Below 60% and you're a services business wearing SaaS clothes.
• CAC payback. Months to recover the cost of acquiring a customer. Under 12 for venture, under 6 for bootstrap.

Vanity metrics to ignore

• Signups without an activation qualifier.
• Website traffic without a conversion breakdown.
• Social media followers.
• Total lifetime users (weighted for churn, this is meaningless).
• Press mentions unrelated to a traffic spike.

A quarterly SaaS review, in one hour

1. Pull MRR growth rate for the last 6 months. Is it accelerating, flat, or decelerating?
2. Pull cohort retention charts. Are newer cohorts better than older ones?
3. Compute CAC payback for the last quarter. Is it improving?
4. List every reason a customer canceled last quarter. Are they concentrated on one theme?
5. Pick one problem to focus on for the next 90 days. Just one.

FAQ

What are the most important SaaS metrics?

For early-stage SaaS: activation, week-2 and month-2 retention, MRR growth rate, gross margin, and CAC payback period. Once past $50K MRR, add net revenue retention and logo churn. Ignore anything else until you're clearly PMF.

What's a good retention rate for SaaS?

For B2B SaaS aim for 90%+ month-2 logo retention and 100%+ net revenue retention. For prosumer SaaS 70% month-2 is decent. Below 60% month-2, you don't have retention — you have a churn engine.

How do investors evaluate a SaaS?

MRR growth rate (are you tripling year-over-year?), net revenue retention (do existing accounts expand?), gross margin (>75% for pure software), and CAC payback (under 12 months for venture, under 6 for bootstrap). The rest is storytelling around those four.