The Only 3 SaaS Metrics That Matter Before $20K MRR

Stop tracking vanity metrics. Before $20K MRR, only 3 numbers matter: MRR growth, retention, and activation. Here’s why everything else is noise.

I’ve noticed something about early-stage SaaS founders — we absolutely love our dashboards. The more colorful the graphs, the better. Funnels everywhere. Segments for days. Ratios that look impressive in investor decks.

But I’ll be honest with you: before you hit $20K MRR, most of that is just noise.

You don’t need 27 different KPIs staring back at you. You don’t need an elaborate LTV:CAC forecast that’s mostly guesswork. And you definitely don’t need a CAC Payback spreadsheet where you’re making up half the numbers.

What you actually need are three simple metrics that show whether your product is working — and whether you’ll survive long enough to prove it.

Why $20K MRR? (And Why It’s Not Set in Stone) So why $20K MRR? By then, you usually have around 20–50 paying customers, depending on your pricing. By then, you finally start spotting real patterns instead of just guessing. You can see who your actual customers are and make decisions based on what’s really happening, not what you assume might be happening.

Before this, your cohorts are too small to mean much. Your assumptions do most of the heavy lifting. Complex metrics? They just confuse things. You’re still trying to prove this thing works — you’re not ready to optimize it yet.

This threshold isn’t a universal law. If you’re selling enterprise software at $5K/month, you’ll hit $20K with just four customers — that’s way too small to spot patterns. On the flip side, if you charge $50/month, you need 400 customers to reach $20K, and you’ll probably see trends sooner than that.

The principle is simple: stay laser-focused until you have enough customers for your data to actually matter. For some companies, that’s $10K MRR. For others, maybe $50K.

Jason Lemkin said it best: “All the other metrics matter later. Early on, stay focused.”

1. MRR Growth: Your Only Real Signal That Things Are Moving Monthly Recurring Revenue — specifically, how fast it’s growing — is the clearest sign your SaaS is actually going somewhere.

David Sacks nailed it: “Revenue growth is the best proof of product–market fit.”

This is your heartbeat before $20K MRR. When it’s climbing, suddenly everything gets easier. Fundraising conversations go better. You can hire people. You have room to experiment with pricing and go-to-market strategies.

What to watch for:

Is it growing month over month?

Is new revenue coming from new customers and existing ones expanding?

Can you see where your revenue comes from (new, churned, downgrades, upgrades)?

What to do with this info:

MRR growth flattens → rethink your positioning, audience, or pricing MRR spikes → figure out what caused it and replicate MRR all over the place → speed up sales or be pickier with who you sell to

But here’s where people mess up: MRR growth alone doesn’t tell the whole story. You can grow revenue fast while burning cash on unsustainable customer acquisition or losing customers left and right. Growth that bleeds customers isn’t growth — it’s running on a treadmill.

You don’t need fancy formulas. Just track where revenue comes from and whether it can be repeated.

Notion’s early days

Notion didn’t obsess over 20 metrics when they started. They focused on one thing: steady MRR growth from small teams paying $8/month.

When they saw consistent MRR increases from teams — not individuals — they went all-in on collaboration features. That MRR signal is what pushed them toward becoming the “team workspace” we know today.

They didn’t do a flashy launch. They started small, stayed focused, and cared more about engagement than total signups. That early focus — just watching one metric — helped them grow to 30+ million users by 2023. And because they built it right, people stuck around and brought their teams.

2. Retention: The Only Real Proof Your Product Delivers Value Early on, founders get distracted by new signups and website traffic. But none of that matters if people don’t stick around.

Retention is where the truth lives.

Jason Lemkin puts it bluntly: “Nothing matters if customers don’t stay. Even a little churn early is a huge warning sign.”

You need to watch two types:

User Retention: Are people still using the product weekly or monthly?

Customer Retention (Logo Retention): Are companies still active 30, 60, 90 days after signing up?

You don’t need perfect Net Revenue Retention yet — sample sizes are too small — but you absolutely need to know if customers are getting value.

Here’s the tricky part: small numbers can mislead. Lose 2 out of 10 customers, and it looks catastrophic — 20% churn! But maybe those two just weren’t a good fit. Maybe timing was off. Hard to know with such small data.

This is why talking to people is critical. Call everyone who leaves. Find out what happened. You’re looking for patterns in conversations, not just spreadsheets.

What to actually do:

High activation but low retention → the value doesn’t last High retention → early signal of product-market fit Talk to churned users immediately — don’t wait

Slack’s 93% retention early on

Before Slack made significant revenue, their retention numbers were off the charts.

On launch day, they had 8,000 users. Two weeks later, it was 15,000. Pretty good, but the real story: Stewart Butterfield said that 93% of those users were coming back every day. And about 30% were sending over 2,000 messages — basically, they weren’t going anywhere.

A few months later, daily users jumped to 285,000, then 500,000. That kind of retention showed that people genuinely loved the product, even before it made much revenue — and that’s what made investors sit up and take notice.

3. Activation: The Thing That Unlocks Everything Else Activation measures whether new users hit that “aha” moment — the point they truly feel the product’s value. It’s often the biggest lever for early SaaS growth.

Lenny Rachitsky: “Activation is the strongest predictor of long-term retention.”

Examples:

Project management → first project + add teammate Analytics → hook up data Email → send first campaign AI → get first usable result

Why it matters: Nothing else works if people don’t reach that moment. Can’t keep them around, can’t convert, can’t grow — none of it happens without activation.

What to do:

Rewrite onboarding to improve activation Remove friction Shorten the path to value

Even a 5–10% bump in activation can increase MRR faster than any marketing campaign

Dropbox

Early users churned unless they synced a file quickly. Dropbox redesigned onboarding → activation ↑, churn ↓.

They also tied their referral program to core value: invite friends → both get storage. This created a viral loop because the incentive aligned with the product.

Result: 100,000 → 4 million users in 15 months. Most growth came from users inviting friends.

Stuff You Don’t Need to Worry About Yet Before $20K MRR, don’t obsess over:

CAC/LTV ratio LTV forecasts Magic Number Burn Multiple Deep cohort analysis Funnel micro-optimization Social media followers Traffic spikes Fancy dashboards

These metrics aren’t bad — they’re just too early. Sample sizes are tiny. Assumptions are huge. Signal-to-noise ratio is low.

Ignoring CAC/LTV completely can hurt later. Spending $500 to get a $50/month customer? Problem. You don’t need exact LTV models yet — just a rough idea if the math will work.

Basecamp Basecamp ignored CAC, payback, funnels, marketing attribution early. Their focus: build something people would pay for and keep using. No dashboards. No LTV spreadsheets. Just retention and revenue.

Many successful early SaaS companies ignored flashy stuff — social buzz, press coverage, traffic spikes, big ad budgets. They focused on actual usage and value. That gave stability and organic growth. Basecamp became profitable long before most SaaS companies knew which KPIs to track.

High traffic and buzz don’t equal a real business.

The Simple Framework That Actually Works Early On Under $20K MRR, track this:

Revenue growing? (MRR ↑) Customers sticking around? (Retention ↑) New users reaching value fast? (Activation ↑)

All three good → you’re probably onto something. One off → stop and fix it before adding more.

Past $20K MRR, yes, track more: cohorts, payback, etc. Early on, these three tell you what matters without drowning in spreadsheets.

FAQs Q: MRR climbs but people keep leaving? A: Classic trap. New signups can hide churn. Fix retention first.

Q: Ignore CAC/LTV? A: Rough idea is enough. Don’t burn money chasing customers.

Q: When track CAC/LTV seriously? A: 50+ customers + steady MRR growth. Before that, metrics are mostly guesses.

Q: How to find activation moment? A: Talk to top users. Ask when it “clicked.” Look for patterns in actions.

Q: Haven’t made money yet? A: Focus on activation + retention. Paying users = real value signal.

Q: Can I use spreadsheets? A: Absolutely. Track MRR, weekly active users, activation rate. Fancy dashboards can wait.

Read the full article here: https://medium.com/startup-insider-edge/the-only-3-saas-metrics-that-matter-before-20k-mrr-5edb13edcc27