ABM (Account-Based Marketing)

LA strategic approach where marketing and sales collaborate to target high-value accounts with personalised campaigns.

ACV (Average Contract Value)

ACV is a sales metric for the SaaS industry. It is the average annual value of a customer contract or subscription. Read more on Saas metrics here.

Activation Rate

The percentage of users who take a key action that indicates initial success or engagement with your product. This metric enables companies to assess the efficacy of strategies to influence new users to perform specific actions.

ARPU (Average Revenue Per User)

Average Revenue Per User (ARPU) is a crucial metric for SaaS companies. It is the average revenue generated per user or account, usually calculated monthly. It's calculated by dividing the total revenue generated by the number of users.

ARR (Annual Recurring Revenue)

Annual Recurring Revenue ARR is a key metric subscription-based SaaS companies use term-based agreements. It it the yearly equivalent of MRR (monthly recurring revenue), used to measure long-term revenue from subscription-based businesses.

Buyer Personas

Fictional profiles representing your ideal customers (ICP), based on data and insights about their demographics, behaviors, and needs. Read how buyer persona mapping is linked to Ideal Customer Profiles.

CAC (Customer Acquisition Cost)

The total cost of acquiring a new customer, including marketing and sales expenses. The total cost refers to the sales and marketing spend including personnel and program cost.

Churn Rate

The percentage of customers who cancel or stop using your product within a given time period. In SaaS, churn is the rate at which customers cancel their recurring subscriptions.

CLV (Customer Lifetime Value)

For any SaaS business, Customer Lifetime Value (CLV) is an indispensable KPI. It quantifies a customer's total revenue throughout their relationship with a company. Businesses can make data-driven decisions to boost profitability and drive sustainable growth by understanding and optimizing CLV.

Cohort Analysis

A method of analyzing customer behavior by segmenting them into groups based on shared characteristics or actions. In startups and SaaS businesses, it typically involves analyzing groups of customers based on the timeframe when they signed up for a product.

Conversion Rate Optimization (CRO)

The process of improving the percentage of website visitors who take desired actions, like contacting sales, signing up or purchasing.

CPA (Cost Per Acquisition)

The cost of acquiring a single lead or customer through marketing or sales efforts.

Customer Journey

The complete buying path a customer takes from becoming aware of your product online/offline to purchasing and beyond. The five customer journey stages include awareness, consideration, decision, adoption, and advocacy.

Customer Retention

The ability to keep existing customers engaged and using your product over time. In SaaS companies, customer retention means customers continually renew software subscriptions, purchase add-ons, upgrade systems, and remain loyal to the business because the customer is satisfied with their experience. Read how to boost customer retention here.

DAU (Daily Active Users)

The number of unique users who interact with your product daily, a key metric for engagement. It details how many people visit and interact with one of those platforms every 24 hours.

Freemium Model

A pricing strategy where a basic version of the product is free, with advanced features available through paid plans. By offering certain features of the service for free, you can attract more users and then encourage them to upgrade to premium versions with more features at a cost. Read more on SaaS business models here.

Gross Margin

Gross margin is the percentage of revenue left over after you subtract your company's direct costs (i.e., the cost of producing or selling your goods or services). SaaS gross margin is the revenue you have after subtracting your cost of goods sold (COGS), which is the cost incurred in delivering and maintaining your software-based product.

ICP (Ideal Customer Profile)

A description of the type of company or customer most likely to benefit from your product or service, based on key attributes like industry, size, or pain points. Read why Sales ICP is a winning sales strategy here.

Inbound Marketing

A marketing strategy focused on attracting customers through valuable content, SEO, and nurturing leads rather than outbound outreach.

LTV (Lifetime Value)

The total revenue a customer is expected to generate over the course of their relationship with your business. In the SaaS industry, where recurring revenue and long-term customer relationships are critical, understanding the financial metrics that drive success is essential.

LTV/CAC Ratio

LTV/CAC ratio is a SaaS KPI that compares Lifetime Value (LTV) and Customer Acquisition Cost (CAC). It is an essential metric used to assess a business's viability. A 1:1 ratio indicates you’re spending as much to acquire customers as you’re earning from them—a warning sign for profitability. A 3:1 ratio is generally considered ideal, meaning for every $1 spent on acquiring a customer, you’re earning $3 in return. Ratios higher than 5:1 might suggest underinvestment in growth opportunities.

MAU (Monthly Active Users)

The number of unique users who interact with your product monthly, used to track long-term engagement.

MRR (Monthly Recurring Revenue)

The predictable, recurring revenue generated from subscriptions or contracts on a monthly basis.

Net Promoter Score (NPS)

A metric that measures customer loyalty by asking how likely customers are to recommend your product to others.

Onboarding

The process of guiding new users to understand and derive value from your product quickly.

Outbound 

Proactive outreach to potential customers through channels like cold calls, emails, and advertising.

PLG (Product-Led Growth)

A strategy where the product itself drives customer acquisition, retention, and expansion through self-service, trials, and viral loops. Read more on PLG and PLS here.

PMF (Product Market Fit)

Product-market fit is the degree to which a product meets the needs of a given market: the alignment between a product's value proposition and the underserved needs of its target customers.

Positioning Strategy

The process of defining how your product is uniquely suited to meet the needs of your target market and stand out from competitors.

Retention Rate

The percentage of customers who continue using your product over a specific period. In SaaS, this means getting your customers to continue using your software instead of switching to a competitor. Tracking customer retention metrics is vital because it directly impacts revenue. Read how to boost customer retention here.

Revenue Operations (RevOps)

The alignment of sales, marketing, and customer success operations to maximize revenue growth. Read more about sales marketing alignment here.

SaaS Growth Models

Business frameworks used by SaaS companies to drive growth, such as freemium, tiered pricing, or usage-based models.

Sales Cycle

The time it takes to move a prospect from initial contact to a closed deal. Understanding your SaaS sales cycle can help you better predict revenue growth and make strategies for the future.

Sales Funnel

The stages a prospect goes through from awareness to becoming a customer, typically broken into stages like TOFU (Top of Funnel), MOFU (Middle of Funnel), and BOFU (Bottom of Funnel).

Sales Playbook

A collection of best practices, strategies, and resources that guide sales teams in achieving consistent results. This will include sales process, outbound sales campaigns, sales tools and templates, content, media, training and coaching.

Sales Script

A predefined guide for sales reps to handle conversations, objections, and pitches during sales calls. They can be as detailed as a word-for-word conversation or as open as a list of key talking points.

Sales Velocity

A measure of how quickly revenue is generated, calculated by multiplying the number of deals, average deal size, and win rate, divided by the sales cycle length. The more opportunities a company has in its pipeline, the higher the potential for revenue generation.

Sales-Marketing Alignment

The collaboration, coordination, processes, KPIs and SLA between sales and marketing teams to achieve common revenue goals. Read more about sales marketing alignment here.

Self-Serve Model

A go-to-market approach where customers sign up, onboard, and use a product without direct sales involvement. Read more on SaaS business models here.

SEM (Search Engine Marketing)

Paid advertising on search engines to drive traffic to your website, typically through pay-per-click (PPC) campaigns.

SEO (Search Engine Optimization)

The process of optimizing a website to rank higher in search engine results, improving visibility and organic traffic. Read more about the future of SEO here.

SQL (Sales Qualified Lead)

A lead that has been vetted by the marketing team and is ready to be engaged by the sales team.

TAM, SAM, SOM (Market Sizing)

Total Addressable Market (TAM), also referred to as total available market, is the overall revenue opportunity that is available for a product or service if 100% market share is achieved. A Serviceable Addressable Market (SAM), also termed Serviceable Available Market, refers to the section of the Total Addressable Market (TAM) a business can reach with its business model. A business can't capture 100% of a given market. Therefore, SAM defines a potential target market size a business can reach. Serviceable Obtainable Market (SOM), also known as the Share of Market, is the market share a company can realistically achieve within its SAM in a specific timeframe. It is the most conservative estimate of the potential market size and helps businesses set realistic revenue targets.