Subscription management reporting and KPIs are all important aspects of a successful subscription business. In this blog post, we will explore the most important reports and metrics in more detail.
Subscription management reporting is essential for understanding how your subscription business is performing. You need to track key performance indicators (KPIs) such as revenue, customer churn rate (the percentage of customers who cancel their subscription in a given period), average revenue per user (ARPU), etc., to determine whether your business is growing or shrinking and whether you are making money or losing money.
Churn can be devastating to a subscription business – it can quickly erode profits and even lead to bankruptcy if not addressed quickly. There are several steps you can take to reduce churn: 1) identify the causes of churn; 2) address the causes; 3) track progress on addressing the causes; 4) repeat as necessary. Implementing these steps should help you keep more subscribers longer and improve your bottom line.
Customer acquisition costs (CAC) is the total cost of acquiring a new customer, including marketing and sales expenses. By tracking your CAC over time, you can determine whether it’s increasing or decreasing and identify strategies to reduce it.
There are a variety of factors that contribute to CAC, so you’ll need to track several metrics in order to understand it fully. The main components of CAC include:
– Cost per lead: The amount spent on leads divided by the number of leads acquired
– Cost per sale: The amount spent on sales divided by the number of sales made
– Average lifetime value (LTV) of a customer: The average revenue generated from a customer over their lifetime with your company
Once you have these figures, you can calculate your overall CAC ratio—the total cost of acquiring customers divided by LTV. This will give you an idea if it’s worth investing in more marketing and sales efforts to acquire new customers. Reducing your CAC ratio means increased profits for your business!
Another one of the most important metrics for subscription businesses is Monthly recurring revenue (MRR). It’s a measure of how much money a company will earn in recurring payments each month.
There are a few different ways to calculate MRR, but all involve taking the total value of all subscriptions and dividing it by the number of months in the subscription term. This gives you an average monthly payment amount.
For example, if your business has 100 customers who each pay $10 per month, your MRR would be $1,000 (100 x $10 = $1,000).
MRR is important because it can help you track your growth over time and forecast future earnings. It can also help you identify which subscriptions are most profitable and assess customer loyalty.
To get started with MRR tracking, here are three steps:
1) Identify your subscription types: There are many different types of subscriptions out there—from SaaS products to memberships—so it’s important to know what type of subscriptions you offer. This will help determine which calculation method is best for you.
2) Determine billing frequencies: Once you know what type of subscriptions you offer, determine how often they bill customers (e.g., monthly, quarterly). This will help determine when to run your calculations each month/quarter so that they accurately reflect your current subscriber base and revenue totals.
3) Collect data: The final step is collecting data on current subscribers and past invoices/payments so that you have accurate numbers to work with. Armed with this data, you can start tracking MRR for your business!
Are you interested in finding out more about these crucial KPIs? Would you like to have all this setup while you focus on scaling up your business? Get in touch with us below.
Six recurring revenue KPIs
that every finance pro should know
Make your subscription business smarter.