SaaS, or Software-as-a-service, is one of the biggest markets in the United States. The market will grow exponentially in the next few years. Due to its high growth and strong demand for SaaS services, the market has become highly competitive. Hence, to ensure that your company’s rate of growth is high, you will need to keep track of your revenue and focus on improving growth. This is where SaaS metrics come to your rescue.
SaaS metrics are benchmark brands that businesses use to track and check their growth and performance. These metrics allow companies to plan for their success, make changes for the future, and adjust strategies whenever the market demands. In this article, we will discuss the top ten SaaS metrics that your company needs to focus on now. Hence, to learn more, read on through to the end of the article.
What Are SaaS Metrics?
NetSuit.com defines –
“SaaS metrics are a way to track how well your software-as-a-service business is performing. SaaS businesses are successful when they can enroll new users and keep current subscribers. SaaS metrics, when well-chosen, give you a real-time indicator of business health and growth.”
Good metrics help businesses in predicting customer retention. These also help the company to determine how the business can differentiate itself from its rivals. Furthermore, strong customer retention helps the company in making long-term relationships. Hence, it enables the business to work towards its growth and increased cash flow. This further takes the company towards its profitability.
Why Companies Require SaaS Metrics?
According to Hubspot.com,
“A $2 million SaaS company needs to be growing more than 90% year-over-year (!) to be in the top 25% of its peers. Companies earning up to $10 million in annual recurring revenue (ARR) need to be growing at least 20% annually to avoid being in the bottom quartile of their peers. To ensure your company is growing at the rate it should be, you need to keep track of revenue, churn, leads, and more.”
Before getting SaaS metrics for your business, you will need to find out the Key Performance Indicators (KPIs) of your business. This will help the business in making decisions better. Furthermore, it will also help the business to monitor the right metrics. This helps in understanding the health of the business and taking action effectively based on insights.
What Are The Most Important SaaS Metrics For Businesses?
According to Stripe.com,
“SaaS businesses have a couple of advantages in customer analytics. For example, SaaS companies can monitor customer behavior well after the point of conversion more extensively than most non-SaaS companies. They also have the ability to change or refine many customer experience variables, both before and after conversion.”
On the other hand, you also need to know that these aspects increase the amount of customer data that SaaS companies collect. However, they increase the pressure on the company when it goes on to choose the most meaningful metrics.
The following are some of the major SaaS Metrics that businesses should take seriously:
1. Customer Churn
It gives you the measurement of how your business lost out on customers within a period of time. You will need these metrics to understand the day-to-day vitality of the business. Thus, you can understand how to retain your customers better.
2. Revenue Churn saas metrics
It lets you evaluate how outside impacts affect customers. However, you will need to calculate this alongside customer churn. This is important to do, as you will not be in a surprising position when you report your overall numbers every quarter or yearly.
3. Customer Acquisition Cost (CAC)
It gives you an idea about the cost of acquiring new customers and how much value the customers bring to your business. You will need to combine this value with CLV to make sure that your business model is viable.
4. Customer Lifetime Value (CLV)
This shows the average amount of money that your customers pay you during their engagement with the company. This metric helps businesses with the correct portrayal of their growth. Basically, you will find out the average worth of customers.
5. Months To Recover CAC
This is also known as the CAC payback period. One of the most important SaaS metrics. It shows the number of months a business takes to generate its revenue to cover the customer-acquiring cost. Here, the customer starts to generate ROI for the business.
6. CAC-To-LTV Ratio
Here, you can determine the lifetime value of your customers as well as the total value the business needs to spend to acquire them. You can basically assess your marketing program’s health.
7. Qualified Marketing Traffic
As your base of users increases, your overall traffic increases. To ensure the right data, it is important for your business to track returning customers independently. You will get to know the traffic that will become your future customers.
8. Customer Engagement Score saas metrics
You can get a glimpse of how engaged your customers are in your business. This shows the likelihood of customer churn for the business. This score will be different for every company depending on the customer’s use of the software.
9. Lead-To-Customer Rate
This shows how well your company is generating leads that are ready for sales and how they are improving over time. Hence, you will learn, on average, how many of your leads turn into paying customers.
10. Leads By Lifecycle Stage
Here, you get the metrics of how many leads you are acquiring in a given customer lifecycle or buying process. Hence, you can get a great insight on your leads, so that you can nurture them in the future.
Hope this article was helpful for you in learning more about the most important SaaS metrics for your company. SaaS metrics provide you with data that allow you to make decisions and grow your business. However, to make the most of them, you will need to track your business’s KPI and metrics consistently and continuously.
If you want your business to be successful with the help of SaaS metrics, you will need to develop a scalable, integrated, and unified business structure. This will also help provide visibility to your investors and business staff. What is your opinion on the importance of SaaS metrics? Share your ideas and opinions with us in the comments section below.