Being a CEO can be a little…stressful.
We get it. You’re knee-deep in data. Steering your business. Justifying everything to stakeholders. Aiming for profitability and investibility. You’re basically keeping it together in an extremely competitive landscape.
Tough gig.
One of the trickiest things about being a CEO is that everyone looks to you. And that can be a lonely place where you feel like you don’t have a lot of help.
Numbers can drive you crazy. But the wonderful thing is that they can help you put your business firmly on the track to success. You just need to know the right numbers to use.
Enter SaaS metrics.
What are SaaS Metrics?
SaaS metrics are the key performance indicators that show you where your business is in terms of growth, financial performance, customer satisfaction, etc. Each one is like a heart monitor for a different part of your business.
And here’s the great news – every single one of them can help you. Yes, you read that right! Something helping YOU!
Once you pick yourself off the floor from the shock, have a look at what you can gain with SaaS metrics.
How SaaS Metrics are Key to Your CEO Success
Here are how SaaS metrics are the key to your success as a SaaS CEO:
Informed decision making: Metrics give you the foundation you need to make the best decisions. Rock-solid numbers let you know where the business stands on sales strategies, marketing, customer retention, and financial planning. You’ll know what’s working and what isn’t. And that means better decisions.
Forecast the future: You’re in a better position to figure out what your performance will look like because some SaaS metrics give you a real-time snapshot of the trajectory. They help you get proactive and adjust where it’s needed.
Monitor customer engagement: Customer SaaS metrics give you insight into how much customers engage with your products how many customers are leave. This can help you pinpoint causes and strategize to make your customers happier and smash those churn rates.
Maximize revenue: You’ll be able to see what kind of revenue you’re making from customers including your upselling and cross-selling. You’ll find out how much you’re spending to get your customers and how well your business is building revenue from your customer base.
Optimize marketing efforts: You’ll instantly know how well your marketing strategies are working and whether their impact is growing through time. This can help you create goals for high-quality traffic and gaining an advantage of your competition.
Key SaaS Metrics CEOs Should Track
Now you know what SaaS metrics are and how they can benefit you, which metrics should you keep your eye on?
Monthly Recurring Revenue (MRR): This metric is the predictable revenue your business expects to get each month. Because recurring revenue can change, it needs to be monitored month-to-month.
It’s calculated by adding up the monthly fees from all your customers.
Formula: MRR = Sum of all monthly fees from all customers
Annual Recurring Revenue (ARR): Like the MRR but on an annual scale. It will help you understand your company’s growth trajectory. But like the MRR, due to the everchanging nature of recurring revenue, it needs to be checked regularly.
Note that ARR is only for recurring revenue. It should not include one-off or variable fees based on usage.
You calculate ARR by adding up the annualized subscription revenue from all customers. For monthly subscriptions, you would multiply the monthly recurring revenue by 12.
Formula: ARR= MMR x 12
Churn Rate: This SaaS metric is simply the percentage of customers who stop using your product over a given period. It impacts your revenue and lets you know about how happy your base is with your products and service.
Churn is calculated by subtracting the number of customers at the end of a period from the number of customers at the start of that period, dividing by the number of customers at the start of the period, and multiplying by 100 to get a percentage.
Formula: Churn Rate = (Customers at Start of Period – Customers at End of Period) / Customers at Start of Period * 100%
Customer Acquisition Cost (CAC): How much do you spend to get each new customer? Once you know this, you’ll get a better understanding of if your marketing team could be performing better.
You can calculate CAC by dividing the total cost of sales and marketing over a given period by the number of new customers acquired over the same period.
Formula: CAC = Total Cost of Sales and Marketing / Number of New Customers Acquired
Customer Lifetime Value (CLTV): This is a big one for SaaS subscription businesses! This SaaS metric lets you know the total amount of revenue you are likely to get from a customer over a lifetime. It’s a current snapshot of your customer loyalty and profitability.
It’s calculated by multiplying the average purchase value by the average purchase frequency and then by the average customer lifespan. This helps you understand the value of your customers over the long term.
Formula: LTV = Average Purchase Value x Average Purchase Frequency x Average Customer Lifespan
Qualified Marketing Traffic (QMT): People who have checked out your website or other content and shown some interest in your brand who meet certain criteria that make them potential customers. Knowing this SaaS metric will help you see if marketing is attracting the right people.
This is a tricky one to calculate with a formula because your idea of a quality lead can vary. So you just identify how many visitors meet your demographic and customer behaviour criteria.
Customer Engagement Score (CES): How much is a specific customer using your product? It’s good to know because if they aren’t using it very much, they might bounce.
This SaaS metric score is another one that depends on your specific business and what actions you value. But most typically, you’ll assign points to actions like how many times they log in, how long they use your product for, whether they complete tasks, etc. Then you add up the points over a given time period.
Formula: CES = Sum of (User Action Points x Number of Times Action Performed)
Net Revenue Return (NRR): This SaaS metric measures how much you’re getting from existing customers (upsells, cross-sells, downgrades, and churn). The percentage accounts for losses and gains, so it shows you how healthy your SaaS business is.
To calculate it, start with the revenue you had at the beginning of a period, add any upsell or cross-sell revenue, subtract any downgrades or churn, and then divide by the revenue at the beginning of the period. Multiply by 100% to get the final percentage.
Formula: NRR = ((Starting MRR + Expansion – Downgrades – Churn) / Starting MRR) * 100%
Lead Velocity Rate (LVR): Want insight into how fast your base of customers is growing? This is the SaaS metric for you. It’s very helpful in predicting future sales and revenue growth.
To calculate LVR, subtract qualified leads last month from qualified leads this month. Then divide by qualified leads from last month. Then multiple by 100% to get the percentage.
Formula: LVR = ((Qualified Leads This Month – Qualified Leads Last Month) / Qualified Leads Last Month) * 100%
Conclusion
Each of this SaaS metrics individually will give you useful insight. But if you use all of them, you’ll get a well-rounded idea of how your company is performing, and which areas need more focus and better strategies.
SaaS metrics might just be numbers, but they’re also hack you need to figure out what to change so that you can boost your chances of success.
If you’d like a chat about how we can help you boost your numbers with ease and automation, we’re here to listen to your situation and goals.
And if you’ve got some insights or experiences of your own to share, we’d love to hear about them. After all, we’re a SaaS company too, on this journey with you.
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