Top 5 SaaS Metrics To Track For Your Business Growth

Staying at the forefront of the SaaS industry requires skill and determination. The SaaS industry has gained significant traction over the last two decades and will continue to grow. This increases the need to understand important SaaS metrics.

The industry has attracted many growth marketers, including myself, but as we progress, it becomes increasingly difficult for people to enter the industry.

This is mainly because people are rushing out without a proper understanding of the SaaS business. Some people don't know the difference between IaaS, PaaS and SaaS models.

This also applies to new SaaS companies that don't understand the key metrics they depend on.

As a result, I have come up with some of the most important indicators that SaaS companies should look for. It was very easy to do, especially if you used the concept of Hedgehog to simplify everything.

1. Monthly Ordinary Revenue (MRR)

Monthly recurring revenue is important for SaaS companies, or any business related to it. It guarantees that you perform your daily operations without worrying about making money. This is one number for tracking all sales, pricing plans, billing cycles, and subscriptions.

However, calculating MRR can be difficult, especially for SaaS companies.

Let's make it easy. All revenue received from all paid customers can be MRR. If you want to know more accurately, just multiply the total number of paying customers by the average revenue per user (ARPU).

2. Annual Ordinary Income (ARR)

Annual recurring revenue, also known as annual operating rate, is recurring revenue generated each year.

The best way to calculate it is to already calculate the MRR. Calculate the ARR using the following simple formula:

ARR = MRR x 12

If you have a positive retention rate, ARR will give you an idea of your annual earnings.

MRR is a better indicator of growth if your SaaS business is primarily run on a monthly subscription. However, if most of your subscriptions are annual, ARR is a good SaaS metric to track.

3. Customer retention rate

On the other side of the deception is customer retention. Customer retention is a SaaS metric that shows the number of customers who continue to use the service.

Needless to say, the services we provide need to build a proper affinity with the brand so that our customers can continue to use them. Good retention means you don't have to spend a lot to attract new customers. You can focus on maintaining your existing efforts.

To calculate your monthly customer retention rate, follow these steps:

• Find out the number of repeat orders from existing customers.
• Just compare the repeat orders with the number in the last two months.
• Divide an existing repeat order by an order two months ago to get the retention rate.

4. Net promoter score (NPS)

The net promoter score is used to measure customer satisfaction using customer surveys. The NPS is one of the most common SaaS metrics used to get ideas for customer satisfaction and loyalty.

The NPS is an effective tool, but it should not be used alone. To properly assess customer satisfaction and well-being, you need to use other factors such as customer feedback and customer ratings.

Measuring NPS is also a great way to measure customer sentiment after a service update / change. Knowing whether a change has had a positive or negative response will help you understand what the average customer wants.

5. Customer acquisition cost (CAC)

According to David Skok, many SaaS startups are failing because they can't find a cost-effective way to reach new customers. Scaling your SaaS business relies heavily on CAC. This is because CAC is a way to find useful ways.

To calculate the CAC, you need to divide the communication cost by the number of closed sales. If the product is sold by a sales team, do not add additional costs. However, if you have an in-house sales team, add that salary as a cost. If you have the right number, use the following formula:

CAC = total communication cost / number of closed transactions

After all, it all means understanding, measuring, and monitoring the right SaaS metrics and KPIs. With all this data and historical data from the success of other SaaS companies and your team, you can truly achieve sustainable SaaS business growth.