What is SaaS Finance? 7 Essential Metrics for 2022

Every good businessman knows that having a great product isn’t enough to run a successful SaaS business.

That’s because without consistently monitoring and improving your company’s financial health, you may quickly run into financial issues. And, in the worst-case scenario, you might even have to close your SaaS business.

This is exactly why it’s important that you have a good understanding of SaaS finance – and we’re here to teach you all about it.

In this article, we will cover:

• What is SaaS Finance?
• 7 Essential SaaS Finance Metrics (You Should Be Tracking)
• 59 Examples of Top SaaS Finance Data Metrics
• SaaS Finance Software

What is SaaS Finance?

SaaS finance refers to the financial plans, models, operations, key performance indicators (KPIs), and other finance-related processes that SaaS companies use to plan, measure, track, and forecast their financial health and overall performance.

That being said, the two key elements of SaaS finance are:

• Financial modeling. Financial modeling is central to SaaS finance as it helps SaaS companies discover opportunities for financial growth. On top of that, financial modeling allows companies to effectively forecast financial changes.
• Key performance indicators (KPIs). KPIs are metrics that SaaS companies can use to measure and improve their financial health. For this reason, KPIs are a vital part of SaaS finance.

Furthermore, a well-designed financial model can help SaaS companies to:

• Determine their financial health.
• Understand the company’s performance.
• Measure the cost of customer acquisition and retention.
• Identify the costs and benefits of switching to a different revenue model (e.g. from a recurring subscription revenue model to a usage-based revenue model).
• Make changes to increase profitability.
• Facilitate business growth.

Nonetheless, forecasting your company’s financial health can be challenging. That’s because SaaS businesses are vulnerable to sudden changes. So, for example, you may not be able to foresee a sudden dip in demand, which can greatly affect your company’s financial situation.

For this reason, monitoring your KPIs is crucial for your business’ success. After all, having more data to work with allows you to make more accurate predictions and strategic business decisions to improve your company’s financial health.

Not to mention, ineffective finance management is the second most common reason why over 90% of SaaS startups fail.

As such, understanding SaaS finance is vital to any SaaS business because it can improve your company’s profitability, financial health, and prevent business failure.

7 Essential SaaS Finance Metrics (You Should Be Tracking)

With so many KPIs out there, many SaaS businesses struggle to determine which financial metrics they should focus on.

So, without further ado, here are the 7 essential SaaS finance metrics that you should be tracking to ensure your business’ financial growth:

#1. Recurring Revenue

Tracking your company’s monthly recurring revenue (MRR) and the annual recurring revenue (ARR) can help you check whether your revenue is growing over time.

Essentially, MRR helps to predict the amount of revenue a SaaS company can expect to generate each month, thus allowing subscription-based businesses to forecast short-term revenue growth.

Similarly, ARR allows SaaS companies to predict their revenue growth year-over-year, making it a useful SaaS metric for forecasting long-term revenue growth.

By helping you track and predict short-term and long-term revenue growth, MRR and ARR allows your business to:

• Measure your business’ performance
• Project financial growth
• Determine business health
• Make strategic business decisions to promote business growth
• Attract more investors

For these reasons, MRR and ARR are two of the most important SaaS finance metrics that any subscription-based business should track.

#2. Customer Acquisition Cost (CAC) and Payback Period

The customer acquisition cost (CAC) is a SaaS finance metric that allows SaaS businesses to calculate the total cost of getting a new customer, including production, advertising, technical, creative, and any other costs related to customer acquisition.

As such, tracking your customer acquisition cost (CAC) allows you to:

• Improve your marketing and sales strategies
• Evaluate your business’ performance and efficiency
• Reduce customer acquisition costs
• Optimize your customer acquisition strategy
• Attract new customers to your business

Not to mention, tracking your CAC also lets you calculate your payback period.

Simply put, the payback period defines the amount of time it takes your business to get back the money spent on acquiring a customer.

Ideally, you want this period to be as short as possible. That’s because a long payback period can severely disrupt your business’ growth.

For example, if your business spends a ton of money on acquiring new customers but isn’t generating revenue quickly enough, you might not be able to introduce new features or, even worse, you might have to stop your operations altogether.

As such, CAC and payback period are essential SaaS finance metrics for ensuring business growth and profitability.

#3. Customer Lifetime Value (LTV)

The customer lifetime value (LTV or CLV) is a SaaS finance metric that calculates the total revenue amount you can expect to generate from a customer from their acquisition until the end of their contract.

As such, tracking your customer lifetime value (LTV) can help you to:

• Boost your revenue
• Increase customer retention
• Determine which customers are most valuable to your business
• Target your most valuable customers
• Evaluate customer loyalty

Not to mention, acquiring a new customer typically costs 5 to 10 times more than retaining an existing customer. For this reason, tracking your LTV can also promote your business’ growth, making it one of the most important SaaS finance metrics.

#4. Churn Rate

The churn rate is a SaaS finance metric that calculates the percentage of customers that your business loses over a specific time period.

Measuring your customer churn rate allows you to:

• Improve customer retention
• Increase customer satisfaction
• Evaluate and optimize your marketing strategy
• Avoid financial loss
• Manage and preserve your business reputation
• Identify business growth opportunities

Essentially, customer loss results in revenue loss.

For this reason, churn rate is one of the key SaaS financial metrics that can help you improve your business’s financial health by increasing your customer retention and customer satisfaction rates.

#5. Average Revenue Per User (ARPU)

The average revenue per user (ARPU) is a useful SaaS finance metric for measuring the total amount of revenue a SaaS business generates from one user over a specific period. Most commonly, companies calculate ARPU on a monthly basis.

The average revenue per user (ARPU) is one of the most valuable SaaS finance metrics as it allows you to:

• Plan and track your business’ growth
• Determine and improve your business’s financial health
• Evaluate your business’ efficiency
• Adjust product pricing to maximize profitability

Moreover, if you run a subscription-based business, you can calculate ARPU at every subscription level. This way, ARPU allows you to see which of your plans are the most profitable.

As such, by helping you identify the most valuable plans, ARPU also helps you to focus your marketing and sales efforts to increase profitability.

#6. Total Contract Value (TCV)

The total contract value (TCV) is a SaaS finance metric that calculates the total amount of revenue a SaaS business generates per each contract.

As such, calculating your total contract value (TCV) allows you to:

• Measure your business’ growth
• Evaluate your business’ financial health
• Accurately forecast future revenue
• Identify your most valuable customers
• Optimize your sales and marketing strategies

Unlike many other SaaS finance metrics (for example, MRR), TCV allows companies to measure the actual amount of generated revenue instead of the expected revenue amount, making it one of the most essential SaaS finance metrics.

#7. Burn Rate

The burn rate is a valuable SaaS finance metric that essentially calculates your business’ monthly expenses.

As such, the burn rate can also help you to:

• Predict overall cash flow
• Effectively manage your finances
• Reveal investment opportunities
• Set reasonable financial goals

Not to mention, the burn rate can also help you calculate cash runway, which measures how long your business can operate without generating any revenue.

For this reason, the burn rate is an essential SaaS finance metric for businesses with limited capital that have yet to start generating revenue.

59 Examples of Top SaaS Finance Data Metrics

• Rosterfy has monthly recurring revenue of $25500000. The company is spending $2000000 to acquire customers, with a payback period of 12 months. Source: getlatka.com/companies/rosterfy
• Selectsoftwarereviews has monthly recurring revenue of $3000000. The company is spending $480000 to acquire customers, with a payback period of 24 months. Source: getlatka.com/companies/selectsoftwarereviews
• Boomtime has monthly recurring revenue of $2000000. The company is spending $400000 to acquire customers, with a payback period of 10 months. Source: getlatka.com/companies/boomtime
• Ripl has monthly recurring revenue of $1000000. The company is spending $300000 to acquire customers, with a payback period of 7 months. Source: getlatka.com/companies/ripl
• FestivalPass has monthly recurring revenue of $6250000. The company is spending $300000 to acquire customers, with a payback period of 7 months. Source: getlatka.com/companies/festivalpass
• Living Security has monthly recurring revenue of $83333. The company is spending $250000 to acquire customers, with a payback period of 3 months. Source: getlatka.com/companies/living-security
• TrustandWill has monthly recurring revenue of $1249950. The company is spending $160000 to acquire customers, with a payback period of 19 months. Source: getlatka.com/companies/trustandwill
• SeriesCode has monthly recurring revenue of $833333. The company is spending $160000 to acquire customers, with a payback period of 18 months. Source: getlatka.com/companies/seriescode
• GeoSpiza has monthly recurring revenue of $7500000. The company is spending $153000 to acquire customers, with a payback period of 20 months. Source: getlatka.com/companies/geospiza
• Crossbeam has monthly recurring revenue of $1800000. The company is spending $150000 to acquire customers, with a payback period of 13 months. Source: getlatka.com/companies/crossbeam
• PaperlessPipeline has monthly recurring revenue of $1690000. The company is spending $150000 to acquire customers, with a payback period of 12 months. Source: getlatka.com/companies/paperlesspipeline
• Wistia has monthly recurring revenue of $15000000. The company is spending $150000 to acquire customers, with a payback period of 15 months. Source: getlatka.com/companies/wistia
• Noteaffect has monthly recurring revenue of $150000. The company is spending $150000 to acquire customers, with a payback period of 5 months. Source: getlatka.com/companies/noteaffect
• SellerSEO has monthly recurring revenue of $3300000. The company is spending $150000 to acquire customers, with a payback period of 9 months. Source: getlatka.com/companies/sellerseo
• Trainual has monthly recurring revenue of $75000. The company is spending $150000 to acquire customers, with a payback period of 20 months. Source: getlatka.com/companies/trainual
• VisitorQueue has monthly recurring revenue of $625000. The company is spending $150000 to acquire customers, with a payback period of 12 months. Source: getlatka.com/companies/visitorqueue
• TrueFace has monthly recurring revenue of $200000. The company is spending $150000 to acquire customers, with a payback period of 15 months. Source: getlatka.com/companies/trueface
• JivoChat has monthly recurring revenue of $2000000. The company is spending $140000 to acquire customers, with a payback period of 7 months. Source: getlatka.com/companies/jivochat
• Kontentino has monthly recurring revenue of $300000. The company is spending $140000 to acquire customers, with a payback period of 28 months. Source: getlatka.com/companies/kontentino
• Arkadium has monthly recurring revenue of $435000. The company is spending $130000 to acquire customers, with a payback period of 9 months. Source: getlatka.com/companies/arkadium
• ZigZag has monthly recurring revenue of $5000000. The company is spending $130000 to acquire customers, with a payback period of 16 months. Source: getlatka.com/companies/zigzag
• OAGAnalytics has monthly recurring revenue of $833333. The company is spending $130000 to acquire customers, with a payback period of 12 months. Source: getlatka.com/companies/oaganalytics
• Reveleer has monthly recurring revenue of $1700000. The company is spending $120000 to acquire customers, with a payback period of 14 months. Source: getlatka.com/companies/reveleer
• Animoto has monthly recurring revenue of $2800000. The company is spending $120000 to acquire customers, with a payback period of 6 months. Source: getlatka.com/companies/animoto
• Yoast B has monthly recurring revenue of $2500000. The company is spending $1500 to acquire customers, with a payback period of 12 months. Source: getlatka.com/companies/yoast-b
• Learnifier has monthly recurring revenue of $99000. The company is spending $1500 to acquire customers, with a payback period of 8 months. Source: getlatka.com/companies/learnifier
• Judge.me has a monthly recurring revenue of $833333. The company is spending $1500 to acquire customers, with a payback period of 1 month. Source: getlatka.com/companies/judge.me
• Zastrin has monthly recurring revenue of $258333. The company is spending $1500 to acquire customers, with a payback period of 12 months. Source: getlatka.com/companies/zastrin
• And has monthly recurring revenue of $8333333. The company is spending $1500 to acquire customers, with a payback period of 29 months. Source: getlatka.com/companies/and
• Dooly Research has monthly recurring revenue of $41667. The company is spending $1500 to acquire customers, with a payback period of 1 month. Source: getlatka.com/companies/dooly-research
• Insurmi has monthly recurring revenue of $150000. The company is spending $1500 to acquire customers, with a payback period of 3 months. Source: getlatka.com/companies/insurmi
• Codelingo has monthly recurring revenue of $15000. The company is spending $1500 to acquire customers, with a payback period of 1 month. Source: getlatka.com/companies/codelingo
• Referagig has monthly recurring revenue of $14000. The company is spending $1400 to acquire customers, with a payback period of 14 months. Source: getlatka.com/companies/referagig
• Awarenesstechnologies has monthly recurring revenue of $600000. The company is spending $1300 to acquire customers, with a payback period of 2 months. Source: getlatka.com/companies/awarenesstechnologies
• Shineinterview has monthly recurring revenue of $500000. The company is spending $1300 to acquire customers, with a payback period of 7 months. Source: getlatka.com/companies/shineinterview
• Styla has monthly recurring revenue of $14000. The company is spending $1200 to acquire customers, with a payback period of 6 months. Source: getlatka.com/companies/styla
• Synchrotab has monthly recurring revenue of $83000. The company is spending $1200 to acquire customers, with a payback period of 1 month. Source: getlatka.com/companies/synchrotab
• E-Days Absence Management has monthly recurring revenue of $500000. The company is spending $1200 to acquire customers, with a payback period of 12 months. Source: getlatka.com/companies/e-days-absence-management
• Everyware has monthly recurring revenue of $11000. The company is spending $1200 to acquire customers, with a payback period of 11 months. Source: getlatka.com/companies/everyware
• Pitchly has monthly recurring revenue of $700000. The company is spending $1200 to acquire customers, with a payback period of 12 months. Source: getlatka.com/companies/pitchly
• Verdigris has monthly recurring revenue of $10000. The company is spending $360 to acquire customers, with a payback period of 7 months. Source: getlatka.com/companies/verdigris
• Pandadoc has monthly recurring revenue of $80500. The company is spending $360 to acquire customers, with a payback period of 3 months. Source: getlatka.com/companies/pandadoc
• Purple Wifi has monthly recurring revenue of $73500. The company is spending $360 to acquire customers, with a payback period of 7 months. Source: getlatka.com/companies/purple-wifi
• Logz has monthly recurring revenue of $1500000. The company is spending $360 to acquire customers, with a payback period of 5 months. Source: getlatka.com/companies/logz
• Komiko has monthly recurring revenue of $1600000. The company is spending $360 to acquire customers, with a payback period of 4 months. Source: getlatka.com/companies/komiko
• Slidebean has monthly recurring revenue of $20250. The company is spending $350 to acquire customers, with a payback period of 5 months. Source: getlatka.com/companies/slidebean
• Parkbench has monthly recurring revenue of $300000. The company is spending $350 to acquire customers, with a payback period of 6 months. Source: getlatka.com/companies/parkbench
• Healthloop has monthly recurring revenue of $132000. The company is spending $350 to acquire customers, with a payback period of 3 months. Source: getlatka.com/companies/healthloop
• Hirewire has monthly recurring revenue of $83333. The company is spending $336 to acquire customers, with a payback period of 8 months. Source: getlatka.com/companies/hirewire
• Frontapp has monthly recurring revenue of $152250. The company is spending $325 to acquire customers, with a payback period of 3 months. Source: getlatka.com/companies/frontapp
• Mural has monthly recurring revenue of $91000. The company is spending $315 to acquire customers, with a payback period of 2 months. Source: getlatka.com/companies/mural
• Duetto has monthly recurring revenue of $37500000. The company is spending $310 to acquire customers, with a payback period of 13 months. Source: getlatka.com/companies/duetto
• Clevertap has monthly recurring revenue of $90000. The company is spending $300 to acquire customers, with a payback period of 3 months. Source: getlatka.com/companies/clevertap
• Wurk has monthly recurring revenue of $126000. The company is spending $300 to acquire customers, with a payback period of 2 months. Source: getlatka.com/companies/wurk
• Freightos has monthly recurring revenue of $91350. The company is spending $300 to acquire customers, with a payback period of 3 months. Source: getlatka.com/companies/freightos
• Jumio has monthly recurring revenue of $400000. The company is spending $300 to acquire customers, with a payback period of 3 months. Source: getlatka.com/companies/jumio
• Metacert has monthly recurring revenue of $127500. The company is spending $300 to acquire customers, with a payback period of 2 months. Source: getlatka.com/companies/metacert
• Support Ninja has monthly recurring revenue of $24000. The company is spending $54 to acquire customers, with a payback period of 3 months. Source: getlatka.com/companies/support-ninja
• Socialproof has monthly recurring revenue of $3200. The company is spending $50 to acquire customers, with a payback period of 0 months. Source: getlatka.com/companies/socialproof

SaaS Finance Software

Tracking SaaS finances manually can be difficult, confusing, and time-consuming.

Luckily, there are software tools that can help you to effectively track your SaaS finances.

Not sure what SaaS finance software is best for your business?

Take a look at our top 3 fastest-growing SaaS finance software you can use to monitor your finances:

#1. Chargebee

Chargebee is a subscription and recurring billing management tool that helps improve SaaS business’ efficiency.

Chargebee generated $115.4m in revenue with 18,000+ customers in 2022, making it one of the fastest-growing SaaS finance software.

Using Chargebee helps your business to:

• Easily create, manage, and adjust subscriptions
• Manage subscription trials
• Customize recurring billing cycles beyond the typical monthly and annual cycles
• Automate and tailor invoicing processes
• Create and combine different pricing models
• Track subscription metrics, generate monthly reports and analyze business’ data
• Integrate CRM, accounting, analytics, helpdesk, tax management, and other tools

#2. Divvy

Divvy is an all-in-one expense management tool for SaaS companies.

In 2022, Divvy generated $100m in revenue with 10,000+ customers.

Using Divvy allows you to:

• Save time by automating manual accounting processes
• Apply for a credit to boost your business’ growth
• Effectively manage your budget by adding card limits
• Consistently track, manage, and customize your budgets
• Use virtual cards to manage subscriptions and minimize online fraud risks

#3. Pigment

Pigment is a business-planning platform that provides companies with a full business overview and improves their decision-making.

In 2022, Pigment generated $12.5m in revenue.

Using Pigment can help your SaaS business to:

• Gather all of your data to build accurate business plans
• Create dynamic business models
• Make data visualizations for your team and customers
• Track SaaS finance metrics
• Accurately predict the impact of your business decisions

Conclusion

And there you go – by now, you should have a better understanding of SaaS finances as well as the most important SaaS finance metrics.

Before you go, though, here’s a quick recap of the key points mentioned in this article:

• SaaS finance refers to all of the financial operations, models, and metrics that SaaS businesses use to determine, plan, and improve their financial health.
• Key performance indicators (KPIs) and financial modeling are the most important elements of SaaS finance.
• Tracking SaaS finance metrics allows you to make strategic business decisions, thus improving your financial health and performance.
• Some of the most important SaaS finance metrics include monthly and annual recurring revenue, customer acquisition cost, churn rate, and average revenue per user.
• Using SaaS finance software can help you to effectively monitor and manage your SaaS finances.