Top 10 KPIs to Track for Your SaaS Company

 

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 you have a flood of data opportunities, it won’t take too long before you get submerged in the waves of metrics and similar acronyms. 

For many SaaS founders, finding good KPIs for SaaS Company is like searching for a needle in the haystack. This gives rise to the question: Which of the metrics can one rely on to see if their investment is a success or failure? 

Don’t fret! This blog post will help you uncover the 10 SaaS KPIs that every entrepreneur and team should keep a close eye on to perform better. Here’s the list:

KPIs For SaaS Company

 

  • Churn Rate 

The churn rate is perhaps the most obvious one. Yet, it doesn’t always mean SaaS founders remember to check up on it. For SaaS service providers and other organizations that work with subscribers, knowing customer churn rates is vital. It showcases the percentage of the subscribers or users you lost. 

Unfortunately, many SaaS businesses tend to overlook this number in favor of more derivative or detailed metrics, and that’s a terrible mistake. The essential thing for any SaaS company is to retain the existing users and get the new ones at the same time. However, if your user fails to stick around until you earn back what you have spent to acquire them (CAC), you are in serious jeopardy. 

It’s pretty straightforward; if you want to grow your revenue, it’s imperative to retain your existing users and acquire new ones. 

  • Monthly Recurring Revenue (MRR)

If churn is not a significant KPI for your SaaS business, then monthly recurring revenue (MRR) definitely is. With MRR, you won’t have to count the number of hours you spent working for a client once you onboard a user. Too often, growing SaaS companies lose track of their secure monthly revenue flow and instead start focusing on revenue and booking numbers. MRR is a simple but forceful metric that keeps a note of new sales, renewals, churns, and upsells every month. 

MRR has numerous business benefits. Building your SaaS project after assessing your MRR growth is a terrific way to get things started. For SaaS businesses, monthly recurring revenue help keep the spotlight on the present and let you oversee how the business grows. Tracking this metric also enable companies to focus on long-term contractually booked sales rather than short ones. 

  • Revenue Churn Rate 

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. 

  • Annual Recurring Revenue 

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. 

  • Committed Monthly Recurring Revenue (CMRR)

It’s a modified form of MRR, where the end goal is to indicate what a SaaS startup revenue will be in the days to come if the company ceases its sales and marketing efforts. 

For SaaS businesses, who sell annual subscriptions, you need to calculate this as a CARR or, in other words, committed yearly recurring revenue. The key difference between CMRR and MRR is that the latter shows the total revenue expected from the users every month. Yet, the CMRR gives you a better idea of the financial standing than the MRR because it also accounts for anticipated churn during the period under consideration. 

Subsequently, this metric gives SaaS entrepreneurs a detailed figure of their company’s financials and proves helpful in predicting future revenues.   

  • Cash Reserve

Of course, this one is a no-brainer, but still, money is one of the most enticing Key Performance Indicators for SaaS companies. Because it takes time to raise funds and develop a great product and you get to see the repayment on that investment after a long time. 

That’s why SaaS founders have to be cognizant of their cash reserves. Failing to do so means ending up spending more than what you actually had and forcing the company to seek outside finance to survive. 

  • Lead Velocity Rate (LVR) 

SaaS founders are always looking to explore future income possibilities. With lead velocity rate (LVR), you can measure your business’s growth in terms of gaining qualified 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. 

  • Customer Acquisition Cost (CAC)

This particular metric shows how much it costs a SaaS startup to acquire new customers and how much value they bring to their business. When combined 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 the total number of new customers you have 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 (CLV)

Customer lifetime value refers to the average amount of 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. 

  • Net Promoter Score (NPS)  

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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