The SaaS Startup Efficiency Playbook: 9 Metrics for Success
- Stephanie Pflaum
- Aug 5
- 8 min read
Updated: Aug 20
The SaaS market in 2025 is a different beast than it was even three years ago, and it’s raised the bar significantly for SaaS entrepreneurs. Capital is more expensive, investors are more selective, fundraising rounds are smaller, AI can’t be an afterthought, and proof of capital efficiency is required.
For SaaS founders, growth and efficiency now determine whether you reach your next milestone or you run out of runway. How do you convince yourself and potential investors you’re on the right track? You start by tracking the right SaaS efficiency metrics and you adjust your strategies accordingly as you go.
Below, we dig into 9 key efficiency metrics every SaaS founder should be tracking and provide examples from real companies. If you want to cut past vanity metrics that are easy to spin, these calculations will get you to the honest truth about your startup’s sustainability.
1. Burn Multiple: The Ultimate Capital Efficiency Scorecard
Most founders are familiar with how to manage and calculate cash burn. Yes, it’s a critical practice—particularly for bootstrappers—to ensure you maintain sufficient runway. But if you’re not going a step further to track your burn multiple, you’ve got a big blind spot. SaaS investors increasingly view burn multiple as the single most important measure of capital efficiency, because it makes inefficiency painfully obvious.
Burn Multiple Definition: How much cash you burn to generate each new dollar of ARR.
Formula: Net Burn ÷ Net New ARR
What's Healthy?
Example
In 2023, Notion reportedly operated with a burn multiple close to 1.0x—meaning for every dollar burned, they added a dollar of ARR. That’s the gold standard and a big reason they’ve attracted massive funding rounds even in a tight market.
Founder takeaways
Track this monthly, not just quarterly. If your burn multiple is climbing, it’s a signal to slow spend or accelerate revenue efficiency. Your startup’s burn multiple should improve as the business matures.
2. The Rule of 40: Your North Star for Profitability
As SaaS startups mature and scale, they need to find a sustainable balance between growth and profitability. The Rule of 40, often used by investors to analyze the health of a SaaS business, links growth and profitability to provide insight into a company’s cost-effectiveness and operating performance. Arguably more applicable to later-stage SaaS startups and investors, any growing SaaS business can use the Rule of 40 as a North Star on the path to profitability and success.
Rule of 40 Definition: Growth rate % + profit margin % should equal at least 40.
What's Healthy?
Investors prefer 50+ for top-tier SaaS, but 40 is still the baseline.
Example
HubSpot consistently hovers above the Rule of 40, balancing strong growth with profitability. Their success proves that SaaS companies don’t have to choose between scaling and fiscal discipline—they can do both.
Founder takeaways
Don’t just focus on your growth rate; pair it with profit margin to prove you can scale the business without hemorrhaging cash.
3. The Magic Number: Sales Efficiency in Action
The Magic Number cuts through the noise of other sales and marketing metrics. It’s a leading indicator of whether your go-to-market motion is scalable or a cash furnace. Think of it as your SaaS revenue engine’s miles-per-gallon rating—it tells you how much revenue you get per dollar of fuel (sales and marketing spend) burned. In other words, the higher your Magic Number, the harder your sales and marketing investments are working for you.
Magic Number Definition: How effectively sales and marketing spend drives revenue.
Formula: (Net New ARR × 4) ÷ Prior Quarter Sales & Marketing Spend
What's Healthy?
Example
Snowflake maintained a Magic Number consistently above 1.0 during its hyper-growth years, showing that even aggressive sales investments can be efficient when paired with strong demand.
Founder takeaways
CAC tells you the cost of acquiring a customer, while the Magic Number tells you whether that investment was worth it. Track it quarterly, benchmark it, and make it part of your SaaS growth roadmap. If your Magic Number is weak, check your ICP targeting. Misalignment between sales activity and customer fit often drags your sales efficiency down.
SaaS Sales & Marketing Efficiency Benchmarks
Lighter Capital collected four years of actual business metrics from more than 125 private B2B SaaS startups to provide both founders and investors with more useful benchmarking data. Check out our analysis of SaaS sales and marketing efficiency benchmarks from 2020 - 2023.
4. Net Dollar Retention (NDR): Expansion Drives Efficient Growth
Net dollar retention (NDR), or net revenue retention (NRR), measures the net revenue left over from your existing customers in a set time period. Functionally, NDR shows what your business would look like if it stopped acquiring new customers. When NDR is over 100%, it's indicative of a quality product that's meeting your customers' needs; when it’s less than 100%, it's time to take a serious look at who's churning out and why.
NDR Definition: Revenue you retain and expand from existing customers.
Formula: (Starting ARR + Expansions – Churn – Contractions) ÷ Starting ARR
What's Healthy?
Example
Datadog boasts 130%+ NDR, driven by relentless upselling of adjacent monitoring and security products. Their expansion engine has turned customers into long-term revenue machines.
Founder takeaways
Land-and-expand still drives efficient growth. Build product adjacencies and expansion paths that naturally add value and deepen customer spend.
5. Gross Revenue Retention (GRR): Stickiness Without the Upsells
SaaS and subscription-based business live and die by retaining and expanding customer accounts. Without a good measure of how your core business is expanding and contracting, your startup could find itself in serious financial trouble you didn't expect—especially when new business slows down and sales cycles get longer. In addition to NDR, you should look at gross revenue retention (GRR) to get a clearer picture of the health of your business.
GRR Definition: How many customers stick around before expansion revenue kicks in.
Formula: (Starting ARR - Churn - Contractions) ÷ Starting ARR
What's Healthy?
Example
Prior to acquisition, Slack consistently reported GRR in the 90s, showing the product’s day-to-day indispensability.
Founder takeaways
A high NDR can mask churn problems. Track GRR separately to ensure you’re not just upselling a shrinking customer base.
6. CAC Payback: The Faster the Better
The traditional unit economics approach to tracking sustainable SaaS growth is still useful in 2025. Metrics like your LTV to CAC ratio and its inverse, CAC payback, tell you if you can make more profit from a customer than the total cost of acquiring them.
CAC Payback Definition: How long it takes to recoup your customer acquisition costs.
Formula: CAC ÷ Gross Margin per Customer per Month
What's Healthy?
Example
Canva’s product-led growth (PLG) engine allows it to recoup CAC in under 12 months, thanks to viral adoption and strong conversion from free to paid.
Founder takeaways
If your CAC payback is long, revisit your go-to-market mix. PLG motions, viral loops, and efficient inbound funnels can accelerate ROI.
7. Burn Efficiency Index (BEI): ARR per Dollar Raised
Burn Efficiency Index (BEI) is an emerging metric, primarily used by SaaS investors, and it may have different interpretations. But in general, BEI measures how effectively founders convert capital into recurring revenue. Initially, BEI was an efficiency metric specifically for dilutive equity—the most expensive capital—that could convey capital discipline with venture funding. Modern usage covers all capital raised, including venture debt and debt financing, since more SaaS companies are utilizing a mix of debt and equity. After all, cash out the door is still cash out the door.
BEI Definition: How much ARR you’ve generated for every dollar of capital raised.
Formula: ARR ÷ Total Capital Consumed (Equity + Debt)
Example
Atlassian famously scaled to IPO with almost no venture capital. Their BEI was through the roof because they monetized early and relied heavily on product-led distribution.
Founder takeaways
Investors in 2025 are asking, “How much ARR did you create per dollar burned?” A high BEI signals your startup can do more with less.
Equity-only BEI is best used when presenting to VCs, since it plainly speaks to your dilution efficiency (e.g. your dilution story).
All-capital BEI is best used for internal business operations or board-level efficiency tracking, since debt also impacts runway and repayment obligations.
8. Product-Led Growth (PLG) Efficiency Metrics
Does your product close the deal before a salesperson does? For companies leveraging their product as the primary driver of customer acquisition, conversion, and expansion, there are a few specific metrics that are as important as CAC and churn:
Percent of new ARR from self-serve vs. sales-led
Free to paid conversion rates
Viral coefficient (users acquired through referrals) = Number of new users invited ÷ Number of existing users
Expansion ARR vs. revenue from new logos
Expansion CAC, which tracks how much you spend to expand revenue from existing customers
Example
Figma’s viral loop—designers inviting teammates—drove a viral coefficient estimated above 1.2, fueling growth at near-zero marginal cost.
Founder takeaways
If PLG is in your DNA, measure it relentlessly. It’s your most efficient growth lever. Aim for a viral coefficient that’s greater than 1 and expansion CAC close to zero.
9. AI-Adjusted Gross Margins
AI can be both a growth accelerant and a hidden profit killer. With AI infrastructure costs eating into margins, SaaS companies can’t afford to ignore this one. Traditionally SaaS businesses have calculated gross margin using cost of goods sold (COGS), which covers hosting, support, and delivery costs. SaaS products that are embedding AI models are incurring new infrastructure costs such as GPU cycles, API calls, and vector database hosting, which can dramatically increase COGS.
AI-Adjusted Gross Margin Definition: Tracking AI-adjusted GM requires pulling out AI-related infra costs and tracking them separately to understand:
Traditional SaaS margin health. What’s the gross margin on your core software?
AI's margin impact. How much is AI lowering your blended gross margin?
What's Healthy?
AI-adjusted gross margins should remain in the 70–80%+ range, even for AI-heavy SaaS.
Example
OpenAI’s enterprise products initially saw gross margins squeezed by GPU costs. By optimizing inference and introducing tiered pricing, they kept margins closer to SaaS norms.
Founder takeaways
If AI is core to your product, margin discipline is existential. Here are 3 ways founders are using gross margin to evolve their SaaS products with AI and maintain capital efficiency:
Track infrastructure costs in buckets, such as those related to AI and those related to cloud hosting.
Track gross margin by feature. For example, legacy workflow automation may have a gross margin of 85% while a new AI co-pilot runs at 60%. This is an effective method for identifying features that are expensive to deliver and potentially underpriced.
Customer-level margin tracking. If you can tie AI infra usage to customer accounts, you can identify which customers or cohorts are profitable and adjust pricing tiers accordingly.
SaaS Efficiency vs. Growth
In 2025, growth is still important but no one looks at growth in a vacuum anymore. SaaS startups are being judged less on their ability to raise capital and more on their ability to use it wisely.
The SaaS founders winning today are the ones who:
Keep burn multiples lean
Drive retention above 120%
Shorten CAC payback
Protect gross margins in an AI-heavy world
Efficiency isn’t just survival—it’s your leading edge.
