The four ratios every SaaS founder should know
Most failed SaaS companies didn't have a product problem — they had a unit-economics problem they refused to look at. Here are the four numbers a board, an investor, or an honest co-founder will ask about first.
- MRR growth rate (month over month, ideally 5–15% in early stage).
- Net revenue retention (best-in-class > 110%, healthy > 100%).
- LTV:CAC (3:1 floor, 5:1 strong, 10:1 something is broken in measurement).
- CAC payback (under 12 months for SMB SaaS, under 18 for mid-market).
Why net revenue retention beats MRR growth
MRR growth can be brute-forced with paid ads. NRR cannot. If existing customers are expanding faster than they churn, you have a real product. If they're not, every dollar of new ARR is just topping up a leaking bucket.
US sales tax: SaaS is taxable in roughly 20 states
After South Dakota v. Wayfair, remote sellers must collect sales tax in any state where they cross an economic-nexus threshold — usually $100k in revenue or 200 transactions. About 20 states classify SaaS as taxable; the list changes most years.
- Common taxable states include New York, Texas, Pennsylvania, Washington, Tennessee.
- B2B sales to resale-certificate holders are usually exempt — but you still need the certificate on file.
- Voluntary Disclosure Agreements (VDAs) limit lookback and waive penalties if you're already over.
Pricing and packaging shapes every other metric
Per-seat pricing rewards expansion in growing teams. Usage pricing scales with customer success. Tiered pricing makes the upgrade path explicit. Hybrid (platform fee + usage) is winning across infra-style products. Whatever you pick, your pricing model should make NRR mechanically possible — if customers can never spend more, your NRR is capped at 100%.
SaaS metric benchmarks (2026)
| Metric | Concerning | OK | Strong | World-class | |
|---|---|---|---|---|---|
| MRR growth (M/M) | < 3% | 3–5% | 5–10% | > 10% | |
| Net revenue retention | < 90% | 90–100% | 100–110% | > 110% | |
| LTV : CAC | < 1.5 | 1.5–3 | 3–5 | > 5 | |
| CAC payback (mo) | > 24 | 18–24 | 12–18 | < 12 | |
| Gross margin | < 60% | 60–70% | 70–80% | > 80% |
Things people ask
What's a 'good' LTV:CAC ratio?+
3:1 is the venture-backable floor. 5:1 is strong. Above 10:1 usually means you're under-investing in growth or measuring CAC wrong (forgot fully-loaded sales costs).
How do I calculate CAC properly?+
All sales + marketing spend (people, ads, tooling) divided by net new customers in the same period. Be honest about loaded headcount cost — that's where most founders fudge the number.
When does a SaaS company need to register for sales tax?+
When you cross either the dollar or transaction threshold in a state — usually $100,000 in revenue OR 200 transactions per year. Use the SaaS sales tax & nexus estimator to map your exposure.
Should I use Stripe Tax, TaxJar, or Avalara?+
Stripe Tax is the easiest if you're already on Stripe. TaxJar suits mid-market e-com + SaaS. Avalara is enterprise. Once you have nexus in 5+ states, automation pays for itself.