Knowing what SaaS metrics to look out for is essential for the success of the business. Tracking the appropriate measurements helps get to the root of potential customer dissatisfaction and liquidate issues, evaluate how profitable a marketing campaign is and estimate the overall product success.
In this article, we’ll tell you about the most important SaaS Metrics you should track.
Monthly recurring revenue, or MRR, is a solid determinant of business profitability and sustainability. SaaS is unique because customers sign up for monthly subscriptions, as opposed to making a one-time purchase or maintaining a constant revenue flow. MRR is calculated by multiplying the number of monthly subscribers by the average revenue per user.
For example, you have 10 customers that bought a subscription for $300/month.
Your MRR will be 10*300 = $3000
Here you can find more info on how to calculate MRR.
- Conversion Rate
The conversion rate is relevant to both sales and marketing. It is the percentage of sales leads that become paying customers. This metric reveals the effectiveness of your sales and marketing campaigns. In order for conversion rates to be high, high-quality leads should have been drawn in to use your service. Bottom-of-the-funnel marketing efforts must be targeted towards a narrow group whose problems you have the solution to. If these or other criteria are not met, the conversion rates begin to drop, and the sales team has to figure out exactly why.
This metric is calculated as follows:
Conversion rate = number of trial users per month / number of new customers per month
Customer Acquisition Cost is a metric that will tell you the sales and marketing costs that are required for obtaining new customers. CAC is defined as such:
Total sales and marketing expenses / number of new customers
This way, you’ll get an idea of roughly how much is spent in order to gain a client, and whether that amount is reasonable compared to the returns you get.
Customer lifetime value is the entire amount of money your company receives or expects to receive from a customer over the course of the account’s life. Although the two statistics are related, CLV provides a more realistic picture of income potential than CAC. One way to calculate CLV is by multiplying the average revenue of the client by the period of the contract (subscription).
- Churn rate
The churn rate of a SaaS business is the percentage of customers that quit their subscriptions. Divide the number of customers canceling their subscriptions every month by the number of customers at the start of the month to calculate the churn rate. To get the percentage, multiply that by 100%.
Depending on your unique business, you may also set this metric’s interval to a year.
The churn rate tells you a lot about customer satisfaction. There are a lot of factors that could be causing your customers to cancel their subscriptions, and tracking the churn rate helps catch these unwanted trends early and do something about them.
- 6. Connection acceptance rate on LinkedIn
If you use LinkedIn for lead generation – it’s important to track the acceptance rate.
If you’ve sent 1000 per month and 600 have been accepted – that’s a 60% acceptance rate.
If you’re actively prospecting on LinkedIn, seeing an acceptance rate of 30% and below is not a good result. Shoot for a 40-50% connection acceptance rate.
As to the reply rate, keeping it 20% and higher is good. If you have reply rate of 10% and lower – it’s not that desirable, according to our sales experts. Reply rate shows how many people replied to any of the messages in your message sequence.
You can analyze your progress in LinkedIn prospecting by visiting your analytics dashboard in your prospecting tool.
For instance, in Closely, a sales automation platform, it’s easy to track your LinkedIn outreach campaign performance and see how many people accepted your connection request and replied to follow-ups. Usually, you should wait a couple of weeks before starting making any analysis.
Closely lets you see which campaign worked best in the long run, making it easy to assess which prospecting strategy works best for you, and what should be tweaked within it. Sometimes, you can save the message sequence but alter the audience.
SaaS sales metrics take into account the particle nature of B2B business model: monthly subscriptions, product trials, demos, etc. This way, average monthly values are used for estimating product success (or a different time period, depending on subscription length). To analyze current business growth and profitability and ensure future growth, it’s crucial to track the following metrics: MRR, conversion rate, CAC, CLV, and churn rate. If you do LinkedIn prospecting actively, it’s critical to track acceptance and reply rates.