The Goldilocks Zone of SaaS Metrics
These are just three examples. What they show is that founders are keen to find out how their business is performing relative to their peers. This makes sense. Comparing various aspects of your business with those of other companies can help you find out the biggest areas for improvement.
If you know, for example, that your conversion rate is sub-par, it’ll be worth your time to understand why and how to improve. If your conversion rate is best in class, on the other hand, rather than trying to squeeze the last fraction of a percent out of your conversion funnel, you’ll probably want to focus on improving other areas of your business.
The challenge is that no single metric is very meaningful if considered in isolation, which is why my answer to these questions usually starts with “it depends”.
Many of these variables are interconnected, so you always have to look at the entire picture. In some cases, two lower-level variables can act together to impact a higher-level variable. For example, if you’re a self-service SaaS company, your visitor-to-trial signup rate multiplied by your trial-to-paid conversion rate determines your total conversion rate from website visitors to paid customers, which is what ultimately matters.
