Top SaaS Metrics to Measure the Performance of Your Business
By Umed S
There are several metrics through which the performance of your business can be measured at regular intervals. Not only do you understand how well your business is performing, but the metrics also help you to re-examine your business strategies. And it is in this context that the SaaS metrics become even more important.
But the problem which most SaaS business experience is that of which metric should they be using. With a metric for almost everything your business is involved in, it becomes difficult to choose the most essential ones. This is why we have come up with a list of the metrics which are highly critical to measure the performance of your business.
1. Monthly Recurring Revenue (MRR)
The subscriptions which a SaaS business gains is an important element to measure its performance. This metric tracks the total monthly revenue a business gains through recurring subscriptions from its customers. Unlike traditional businesses, the maturity period of SaaS businesses is longer. Thus it takes time to get returns from capital which is invested in customer acquisition. This is the reason why it becomes all the more important to keep an account of what the business is earning as recurring revenue each month.
With this metric you can easily keep track of the amount of recurring income your business gains.
2. Churn Rate
The number of customers who opt out of your services each month is called churn rate. Every SaaS business aims at bringing down the churn rate, so that the number of its customers does not come down. With this SaaS metric, you easily understand the areas wherein your marketing strategy is lagging behind and make necessary changes in both your marketing strategy as well as quality of your product.
Thus with the help of churn rate you can effectively understand what are the requirements and expectations of your target audience.
3. Cost of Customer Acquisition
Just like you need to keep a track on how many of your customers are opting out of your services (churn rate), you also need to keep an account on how much does it cost your business to acquire a customer. Cost per acquisition (CPA) is a metric which will set the tone of other costs of your business. Every SaaS business focuses on keeping this cost at the minimal value, so that capital can be used in product improvement and better marketing strategies.
Apart from knowing the cost of customer acquisition, CPA also helps in analysing the present marketing strategy of your business and whether it is targeting the right client base. You also get to know which individual marketing campaign is actually getting you customers. This way you can channelize your resources towards the apt campaigns and push up the number of customers signing in for your services.
4. Average Revenue per Customer
Every business runs on the simple calculation of how much did they invest and what is the return they gained from their investment. This is exactly what you get when you use this SaaS metric for your business. Based on this data you can look for loopholes in your services, and come up with solutions which will increase the revenue you receive from each customer of yours.
The average revenue per customer metric is something which will keep your sales and marketing team on toes. They can come up with annual plans, or build strategies to up-sell your products. Thus not only can you increase the revenue from each customer but also bring down the churn rate of your business.
5. Lifetime Value (LTV)
This value is gained by adding the churn rate to the average revenues gained from each customer. Based on this figure you get to predict the revenues which you can gain in the future. LTV can be calculated with the help of a number of formulas, and most of these formulas include the expense involved in client acquisition, in providing services to them and the profit margin which is expected by the entrepreneur.
For those who are new to SaaS business, it is advised that they stick to a very simple formula in the initial stage. Once you get comfortable with the calculation part, you can move on to complex formulas.
These are some of the top SaaS metrics which every business needs to track. As experts in SaaS, we recommend that you stick to these basic metrics, instead of using multiple metrics at one stroke. Sticking to minimal yet crucial metrics avoids unwanted confusion and you get a sleek and clear-cut picture of how your business is faring against its competitors. So follow these metrics and work towards growth and expansion of your business.
Stripetics has a great team of developers whom are working on analytics for your business. Stripetics is an accomplishment from us to advice you save time on analysing your admired abstracts with ease. Stripe Analytics and Metrics for your Saas business.
Article Source: Top SaaS Metrics to Measure the Performance of Your Business