We are talking about SaaS metrics. Read this article to know which metrics we suggest tracking to ensure SaaS success and growth. On our channel, we share thoughts on recent developments in the tech industry. Follow us not to miss new articles!
We at EZtek work with Software-as-a-Service companies a lot. One of their priorities is to identify points of growth and reduction marks with the help of key metrics interpretation. We are excited to explain which metrics are most useful.
SaaS metrics can be split according to their purpose. Let’s look at every group:
Growth Metrics
We use them to quickly get the information about general performance and where to develop further. So, let’s see which metrics we suggest tracking.
Monthly Recurring Revenue
Which shows recurring revenue per month and is one of the vital metrics that should be tracked in SaaS reporting. To get it, you need to multiply the number of customers by the average amount built.
Annual Recurring Revenue
ARR is calculated by multiplying monthly recurring revenue by 12.
Churn Rates
We define Customer churn rate and Revenue churn rate.
Customer churn rate
Indicates the number of customers who left after signing on. Besides monthly figures, annual customer churn is essential too
Revenue churn rate
Indicates the rate of lost monthly recurring revenue due to subscriptions downgrade and unsubscribe customers.
Gross Margin
Gross Margin is a revenue ratio left after the withdrawal of costs for customer acquisition and service.
EBITDA SM
- Earnings
- Before Interest
- Taxes
- Depreciation
- Amortization
- Sales
- Marketing.
The common performance benchmark for the overall software business is to follow the 40 rule.
The essence of the rule is the SaaS growth rate.
Sales Metrics
Revealing insights regarding your sales team efficiency, the validity of the pricing model and the customer lifetime with your service.
Annual Contract Value
Total contract value respectively shows income during the whole period of the contract
Average Revenue per Account
Indicates how much revenue is committed by a standard customer.
Customer Acquisition Cost
You need to divide your sales and marketing expenses by the number of new customers.
Customer Acquisition Cost Payback Period
It shows how much time it takes to cover the cost of signed customer acquisition. It is counted by dividing CAC by MRR per customer.
Customer Lifetime Value
Represents the total revenue brought by the customers during the whole subscription period.
Well, to understand if the business will gain money in the distant future, we need to keep the customer lifetime value to customer acquisition cost ratio on a level of more than three.
A simple way to check sales efficiency is to count the rate of one contract. This is calculated as a share of one deal out of total deals.
Customer Success Metrics
Daily/ Monthly Active Users
Mean the number of unique users who interacted with your product during a day or a month respectively.
NET Promoter Score
NET Promoter Score asks a single question about the possibility of recommending a service or brand to a friend or a colleague. Based on the answers to this questionnaire, we divided the customers into three groups, such as:
- Detractors: People who don’t like the service.
- Passives: Those who are indifferent.
- Promoters: People who like and would be happy to recommend the service.
So the formula of NPS is percent of promoters minus the percent of detractors.
Customer Satisfaction Score
It is used to get users’ thoughts about particular features of the product. To count CSAT, the users are asked to rate the product and or its features on the scale: 1 to 3; 0 to 7; 1 to 10,…
Upsell and Cross-sell Rates
Upsell and Cross-sell Rates are used to calculate how well existing customers are upgrading their accounts or buying additional services or features.
Referral Revenue
Referral Revenue is a total income by successful customer referrals over the period. To gain insights from this figure, it should be compared to the number of investments to the referral program.
SaaS valuation metrics serve one goal, to help you make optimal decisions to drive your business. It can be a compass pointing in the right direction of causes, growth opportunities and ultimate solutions.
This article was prepared by the EZtek’s team. We provide software development, UI/ UX design and testing services to top brands worldwide.
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