KPIs, also known as Key Performance Indicators, are critical for evaluating the performance of any business. KPIs help startups identify pain points in their offerings and improve their services to improve their key metrics. Most of the investors will review the startup’s growth trajectory and KPIs before they agree to invest in their company. It’s essential for startups to identify their KPIs and track them to improve their business. 

Every startup has different offerings, revenue models, customer behaviours, and other related attributes which means that a startup needs to define their own KPIs to track their performance. However, many fundamental patterns are repetitive in businesses. Identifying core metrics used by different companies can be useful for startups to understand and build their own metrics. 

To provide a base source of reference, we have listed down some of the prominent KPIs used by SaaS based businesses. The details are shared below:

1. Customer Acquisition Cost: This metric refers to the expense incurred by the company in acquiring a new customer. Based on the expense, the company can understand how much time it will take to recoup its investment, and also understand the efficiency of different marketing channels, and take necessary measures.  
2. Customer Lifetime Value (LTV): This metric measures the average revenues acquired from a client by the startup in its lifetime. In other words, it gives us the maximum benefit a company can gain from a startup. This metric plays an important role in making further decisions about marketing spends, margins, etc.
3. CAC-to-LTV Ratio: This metric gives us a sense of how well our marketing spend and other spends for customer acquisition are fruitful for business. In general, if the customer acquisition cost is higher than Lifetime value of the customer, it means that the business won’t make any profits. It’s advised that a startup should target at least a ratio of 1:3 to help the startup sustain in the long run. Likewise, this metric will also help us make decisions in monetary spending for marketing channels accordingly. 
4. Churn Rate: This is one of the most important metrics every startup needs to track, since it refers to the number of clients, businesses, customers that the company is losing in a given time period, i.e. monthly, or annual basis. If the churn rate is too high, then there is no point in increasing sales, since the business is acting as a leaky bucket, losing clients on the go. Usually, companies focus on retaining new customers first, and expanding their clientele next. 
5. Annual Growth Rate (AGR): It refers to the revenue growth of the business annually. It’s a summary metric, meant to give an overview of how the year turned out, and how the business performed compared to previous years. However, getting insights will be possible only when we have data on a much granular level.
6. Average Revenue per User (ARPU): This metric gives us information on the average revenue that the company is making per subscriber, within a specific time period.  In general, it is calculated by dividing total revenue with total customers for a specific timeframe. However, the formulation might change based on the nature of the business, clientele, etc.
7. Monthly Recurring Revenue (MRR): This metric provides us details of the revenues the company is making on a monthly basis. It gives a good idea of the consistent stream of income the company has from its clientele. In general, ARPU multiplied with a given month can give us a good estimate of the MRR, but the equation might change based on the business and the underlying logic of calculating the ARPU. 
8. Annual Recurring Revenue (ARR): It is a yearly statistic that gives us an estimate of the earnings made by the company through its long term clients. This can be calculated by multiplying the ARPU with the year as timeframe. 
9. Conversion Rate: The term is a bit ambiguous, but it is frequently used in any funneling strategy. For example, every lead acquired by the business goes through the sales funnel and finally converts into an expected outcome, i.e. buying the product/service, signing up for the blog, etc. This is called as lead to customer rate, which is one of the examples of conversion rate metrics. You can apply similar conversion metrics based on different funnels used in your business.
10. Cash: It is a very simple metric, which is relevant for any business. The intention of tracking this is to ensure that the business has enough liquidity to handle any unforeseen situations. This becomes more important for SaaS based businesses, since most of the contracts are long term in nature, and the payment terms might vary based on the terms of contract. A company must ensure that they consider liquidity too before finalising the deal.
11. Net Promoter Score (NPS): This metric is quite heavily used to measure customer’s satisfaction with your products and services. In simple terms, it is a customer experience metric that shows the tendency of buyers to recommend the startup’s product or service to their family, friends, etc. This is also a good indicator of future customer churn, so it should be tracked by every startup.
12. Average Sales Capacity: Most of the SaaS businesses need to place a significant amount of investment in building a sales team and tracking their efforts, spending etc., since acquiring high worth customers requires a lot of cold calls, many interactions, and a constant human touch in every phase of the customer journey. In such a scenario, it’s necessary to track the average metrics on sales capacity, i.e no. of calls per day, no. of meetings per day, no of conversions per quarter, etc. This will help the startup understand how to scale their sales team and the advantage they gain by adding another sales agent. 
13. Viral Coefficient: It gives us information on how many clients you can get from your existing customers. Best SaaS businesses can grow exponentially if the clients love your product, and promote your product with personal interest. You can also provide referral benefits to the clients, which will incentivize them further. Having a high viral coefficient, i.e. above 2-3, will be a huge advantage to the startup.  
14. Runway: This is one of the most important metrics for startups in general. Considering that the startup hasn’t achieved profits yet, and is making its way based on the funds raised, this metric answers how long the startup has before it runs out of cash.  Based on the runway available, the startup should have a buffer in place and a complete execution plan that ensures they meet their milestones and go to the next stage, i.e. raising funds for the next round, achieving profitability, etc.

These are a few common metrics that can be used by startups to track their KPIs. However, it is necessary to understand that most of the startups have different business models, nature of clients and other varying parameters, which means these metrics might not be directly applicable to their startup. It’s best if the founder tries to understand the basics from here and builds its own KPIs based on the requirements of the startup.