No matter which industry you are in, there is always data you can track. Thus, it is incredibly essential for SaaS companies to discern their key performance indicators (KPIs) quickly and transparently.
However, when there is a stream of data opportunities, it won’t be long before you get drowned in the tide of metrics and similar abbreviations.
For many SaaS founders, finding good KPIs for a SaaS company is like a bootless errand. . This gives rise to the question: Which of the metrics can one rely on to see if their investment is a success or failure?
The blog post will help you uncover the 10 SaaS KPIs every enterpriser or founder should keep a close eye on to perform better.
Perhaps the most obvious is the churn rate. Yet, SaaS founders often don’t remember to check on it regularly. A SaaS service provider, or any organization that works with subscribers, needs to know their customer churn rates. It displays the number of subscribers a SaaS business has lost during a specific period.
Unfortunately, SaaS businesses often disregard this number to focus on more detailed metrics, which is a severe mistake. Keeping existing users and gaining new ones is the key to any SaaS company’s success. However, the risk is grave if your user leaves before you can recoup the cost of acquiring them. (CAC), you are in serious jeopardy.
There’s nothing complicated about it. Retaining existing users and acquiring new ones is the key if you hope to grow your revenue.
Monthly recurring revenue (MRR) for SaaS companies is an important KPI if churn is not one. It simplifies counting hours once you’ve onboarded a client. Unfortunately, many SaaS companies focus too much on revenue and booking numbers rather than their secure monthly revenue flow. A company’s monthly MRR helps it define new sales, renewals, churns, and upsells.
Numerous business benefits are associated with MRR. A great way to get your SaaS project off the ground is to assess your MRR growth first. For Software as a Service business, monthly recurring revenue help keep the spotlight on the present and let you oversee how the business grows. In addition, tracking this metric allows companies to concentrate on long-term contractual agreements rather than short-term ones.
This particular KPI is used to measure the outside impact that some users might have over others. Especially if subscription price varies and depends on the number of users or seats, a client pays for. In this scenario, the customer churn rate would be different than the churn rate as some customers might be generating more revenue than others.
To keep things simple, make sure to evaluate both customer and revenue churn. Else, the figures will surprise you when the quarterly or yearly report hits your desk.
You can call Annual Recurring Revenue (ARR) the extended version of monthly recurring revenue (MRR). It may seem like a deception but stay cool no one is going to call the police.
Some businesses like to calculate their annual recurring revenue and monthly recurring revenue manually. But most of them have a proper system in place that calculates all the SaaS metrics in real-time.
Mind you, it’s the recurring revenue that makes the SaaS business model so tempting to investors and founders. Users continue to pay you as long as you keep them delighted by offering value through your service.
It’s a refined version of MRR that projects the revenue of a SaaS startup in the days to come when a company ceases to market and sell and marketing efforts.
For SaaS businesses selling annual subscriptions, it is vital to compute this as a committed yearly recurring revenue (CARR). Mind you, what separates CMRR and MRR is that the latter shows monthly anticipated revenue from the users. Still, CMRR gives you a bright idea of the fiscal standing compared to MRR because it also counts expected churn in the period under review.
Subsequently, it gives SaaS founders an exact figure of their finances and proves helpful in predicting subsequent returns.
Of course, money is amongst the most enticing Key Performance Indicators for SaaS companies. Because raising funds and developing a worthwhile product takes a long time before the return becomes apparent.
That’s why top executives must remain cognizant of their cash holdings. Non-compliance with this means ending up spending more than what you actually had and forcing the company to seek outside finance to survive.
SaaS founders are always looking to explore near-income opportunities. With lead velocity rate (LVR), you can gauge the growth of your business when it comes to gaining leads.
. It reflects the percentage of total prospective clients you are currently working on to convert them into paying customers.
Unfortunately, most sales metrics are backward-looking. As a result, you never get a clear picture, but LVR is a different story. The forward-looking metric tells you exactly what you need to know.
This particular metric outlines what it costs a SaaS startup to obtain new customers and what value they bring to the business. When coupled with customer lifetime value (CLV), customer acquisition cost (CAC) helps companies ensure that their business model is viable.
To determine CAC, divide your total marketing spend and sales by how many new users are acquired during a given time. For instance, if you have spent $50,000 over a month and acquired 100 new customers, your CAC would be $500.
Customer acquisition is the primary focus of any SaaS business. With full qualified CAC rates, SaaS companies can efficiently manage their growth and accurately evaluate their customer acquisition process value.
Customer lifetime value denotes the money your customers pay you during their engagement with your company. It provides businesses with an accurate picture of their growth by showcasing what your average customer is worth. And those in the startup phase can leverage it to display the value of their company to investors.
So, each renewal means gaining another year’s recurring revenue, which eventually increases the lifetime value of every user.
The essential metric shows the quantitative and qualitative reports of customer satisfaction. SaaS businesses use the net promoter score (NPS) to assess their experience with their company on a numerical scale and give them a good idea of why they chose to assign a specific value to a service or product. In addition, it allows the SaaS companies to organize and rank customer reviews and make sure the valuable feedback they accumulate is put to its best use.
In short, it’s a terrific metric to determine how a SaaS company has grown in terms of customer satisfaction. Moreover, since the users are ranking their experiences in numbers, companies can record these historical values and discern how they have performed over time.
For example, if the scores have gone up, it means your customers are pleased with the product or service. However, if they are rappelling down, you can use those specific customers’ feedback and quickly figure out why users aren’t happy.
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