Scaling a SaaS business is difficult, but it is not impossible. Here are the metrics that every SAAS business should be tracking.
You want to get more customers, so you should track your lead-to-customer rate because it enables you to assess how you’re getting sales-ready leads. Lead-to-customer rate helps you see just many of these leads are turning into paying customers. It will also help you determine whether your lead generation methods and sales process are working or not. Calculate the lead-to-customer rate by dividing the total number of customers you gained for any given month by the total number of leads you got. Multiply the quotient by “100.”
Customer Churn Rate
Keeping customers is important. The customer churn rate allows you to determine the amount of business you have lost within a specific time period. It also helps you track your company’s daily vitality. A high churn rate means that there might be something wrong with your service or product that’s causing you to lose customers. To remedy this, try and communicate with your loyal customers and ask their reason for staying. Talk to customers who want to buy from you. Understanding all details of your customers can help you fix your product. If you have a customer base that buys only 2 to 3 times every year, then you should look at your yearly churn rate.
Customer Acquisition Cost
This metric shows the amount that you spend to get new customers and the value they bring to your company. Add up your expenditures for sales and marketing last month and divide the sum by the number of customers you gained within the same period. This will give you the average amount spent for every new customer. If you are spending more money than what you’re bringing in, then you are definitely losing money. Customer analytics can help you determine the cost per acquisition for your individual marketing campaigns. It shows which campaign brings you the highest amount of profit.
Average Income Per Customer
This refers to the average income you have already obtained from your customers. Once you’ve established a solid strategy to get customers and control the churn rate, you should focus on cross-sells and up-sells to increase your profit. Your goal is to steadily increase the profits you are getting from customers. Your Average Income Per Customer will tell you whether you are succeeding or not.
Customer Lifetime Value
Customer Lifetime Value pertains to the usual amount of money that customers pay during their transactions with your company. In other words, it shows the worth of an average customer. It also allows you to get an accurate representation of your growth. To get your Customer Lifetime, divide “1” by your company’s customer churn rate. To determine your Average Revenue/Account, divide your total income by the total number of clients. Multiply your Customer Lifetime by your ARPA to find your Customer Lifetime Value.
By combining the churn rate and the average income per customer, you can determine just how much profit you can expect from your customers. The average income per customer is the revenue you have already received, while the lifetime value is an estimate of the profits that you will get in total.
Starting with a simple version is best for startups. Multiply your regular subscription length by your average monthly income per customer. You may also want to include acquisition and support costs to see if a customer is profitable in due course. By getting the lifetime value of various customer groups, you will know where to focus your efforts to grow your business fast.
Monthly Recurring Revenue
Tracking your monthly recurring revenue can help you determine whether you are building a sustainable business or not. It shows the amount of income increase that you expect to get each month. The monthly recurring revenue will serve as the main benchmark for your business.
You have to track the number of people who take all the steps required to become a customer. This metric will help you assess which part of the marketing system must be improved. The marketing funnel usually involves asking customers to visit your website, signing up for a free trial, activating their subscription and upgrading to a paid plan.
Look into your quarter’s or last year’s data to set a starting point to measure against. You can use that starting point to determine whether your business is growing or not.