The SaaS KPIs That Actually Matter in 2022
Growing a business is challenging in any industry, but growing a software as a service (SaaS) firm is particularly challenging. Even publicly traded SaaS firms struggle to turn a profit and the majority of SaaS businesses fail to deliver consistent revenue growth.
You can’t just switch your software distribution mechanism to the web and expect everything to work to make your SaaS firm profitable. When it comes to your operations for marketing, promotions, and customer success, you must make intelligent, data-driven decisions. You have to monitor the appropriate SaaS KPIs and metrics in order to make data-driven choices.
What is a KPI and how does it work
Any measure that is essential to monitor in order to assess how well a business is performing in relation to its goals is known as a key performance indicator (KPI). If you’re not acquainted with this, you’re going to receive a surprise.
There are several measures that can be assessed, which is one of the difficulties with KPIs. If you’re new to tracking KPIs and assessing metrics, you might believe that you ought to be monitoring every KPI. This isn’t a smart idea since it is ineffective to track them all. Additionally, it will be difficult to track all the data without a top-notch tool to aggregate and show your KPIs.
Don’t stress! You’ll find that this blog article will help you through it. The 10 KPIs listed below should be monitored and analyzed by every SaaS business and staff in order to improve performance. Here is a list of the top 10 SaaS KPIs that you should pay attention to if you want to accelerate your company’s performance.
Marketing SaaS KPIs
Building your marketing campaigns on reliable data is a terrific way to increase their effectiveness. Here are some SaaS KPIs that will definitely increase the profitability of your marketing initiatives.
The number of distinct people that visit your website in a given month is referred to as monthly unique visitors, and it’s a KPI that may reveal a lot about how well your marketing strategies are working.
The number of monthly unique visits provides insight into how well you are doing at attracting customers to your website using both paid marketing strategies like PPC advertisements and free marketing strategies like search engine optimization. Achieving a high amount of monthly unique visits indicates that the top-of-funnel marketing approach is working as it should, even if there is still plenty to be done after a visitor arrives at your site.
Screaming into the abyss is pointless, and even a well-designed website with interesting content won’t bring in many customers if no one ever sees it. Because of this, SaaS firms should prioritize increasing their monthly unique visitors using a variety of marketing strategies.
To provide clients the chance to try out their product before committing to a purchase, many SaaS providers offer a no-cost trial or “freemium” version. Given approximately 25% of SaaS free offers result in a conversion, as per statistics from UserPilot, it is an effective tactic to use. The quantity of clients that sign up for a trial is a crucial measure to monitor if your business offers free trials or perhaps a subscription version of the item as part of its marketing plan.
Tracking monthly unique visits gives you information about the performance of your top-of-funnel marketing initiatives while tracking signups gives you more information about the success of your marketing initiatives a bit farther down the funnel. If you are driving a lot of traffic to your website but aren’t seeing many people sign up for free trials, you may need to think about way to make your offer more alluring.
Product Qualified Leads
Customers that have used your product before and are therefore very likely to become paying customers are known as product qualified leads (PQLs). You might want to regard any consumer that joins up for your SaaS product’s free trial or freemium edition as a product-qualified lead. As an alternative, you may also hold off until they meet particular triggers, such as utilizing the product for a predetermined period of time, before adding them to the PQLs classification.
Tracking your PQLs enables you to focus on the lead group that is most likely to change in either scenario. It also offers information on how well your bottom-of-funnel marketing initiatives are working.
Average Revenue per Account (ARPA)
A new client’s value to your business over a specific time period is measured by the average revenue per account (ARPA), which is an indicator of how much income the average registered user generates for your business on a monthly, bimonthly, or annual basis. When evaluating the efficiency of your marketing division, ARPA offers information on how well your team is able to advertise to your current clientele.
Your ARPA will be the cost of your single SaaS product if you just have one available for sale, thus it isn’t really a measure worth monitoring. However, ARPA is one of the most important SaaS metrics if you attempt to advertise more goods or upsells/cross-sells to your current clients.
Paid or Organic ROI
There are two types of website visitors: those who found your website through a paid marketing effort, such as a PPC ad, and those who found your website organically using a search engine. It’s critical that both your paid and organic marketing initiatives for your SaaS business succeed in order to have an optimal web presence. Understanding the ROI of both will aid in pointing out potential areas for improvement.
If you’re seeking further guidance about how to measure the efficacy of your marketing department, ROAR CMO has a lineup of mastermind marketing executives available to sharpen your KPIs on a fractional basis. This means you can access the support you need to boost your analytics when you need it, without the high overheads of an in-house Chief Marketing Officer. Give us a call and we’ll talk you through the entire process.
Sales SaaS KPIs
Your sales staff may assess their performance and pinpoint opportunities for improvement using a number of crucial KPIs, including the following:
Monthly Recurring Revenue (MRR)
The indicator known as monthly recurring revenue (MRR) analyzes new sales, upsells, extensions, and attrition each month. If turnover isn’t your company’s most crucial KPI, MRR definitely is. Once you’ve secured a customer, you may stop manually keeping track of the time you spend operating for them because MRR does this for you. Growing SaaS firms sometimes neglect their guaranteed monthly income flow in favor of bookings and sales figures.
Monthly recurring revenue offers several important business advantages. Developing your SaaS business following the MRR increase is a great approach to getting things going. MRR gives SaaS businesses a way to monitor their business growth while helping them to stay present-oriented. Monitoring MRR can also help businesses give long-term contractually scheduled sales priority over transient ones.
Customer churn rate is crucial for a SaaS provider or any other business that deals with subscribers since it displays the proportion of subscribers or customers lost.
It’s a grave error for too many SaaS companies to ignore this figure in favor of more in-depth or derivative metrics. Retaining current clients while also bringing on new ones is the most crucial goal for every SaaS business. If your average client does not stay with you long enough to allow you to recoup your customer acquisition costs (CAC), then you are in trouble. The reason for this is rather simple: maintaining your current clientele and gaining new clients is crucial for revenue development. Customer churn rate is crucial for a SaaS provider or any other business that deals with subscribers since it displays the proportion of customers or subscribers lost.
Revenue Churn Rate
The revenue churn rate should be monitored more closely than the customer churn rate. This KPI essentially calculates the income lost by your business while also assessing the potential external influence some clients may have on others.
If your business uses a variable subscription fee based on the number of licenses a client purchases, this KPI is very important. You’ll find some specific relationships between the monthly revenue churn rate and the customer churn rate. There may be some variations among purchasers, though, and some may bring in more money than others. This is why you should combine MRR with churn rate tracking so you are able to focus on retaining your most important clients!
You should, at the very least, track the revenue churn rate on a quarterly basis. However, if you’re serious about increasing your revenue, try to compute this KPI on a regular basis.
Annual Recurring Revenue ARR
The annual recurring revenue (ARR) formula is simple: double your MRR by 12 months. Most firms now have systems that determine SaaS metrics in real-time. However, some SaaS enterprises prefer to compute their MRR as well as ARR manually.
The SaaS business strategy appeals to entrepreneurs and investors due to the recurring revenue. As long as you satisfy your customers’ needs by offering them value through your service, they will continue to pay you. When it comes to setting prices in new businesses, experiment with various rates each quarter and make adjustments in light of what worked best. So that your SaaS firm may continue to expand, you can be sure of how much your clients value your company and determine their level of happiness with your product.
Committed Monthly Recurring Revenue (CMRR)
MRR, in its modified form, stands for monthly recurring revenue (CMRR). In contrast to CMRR, which takes into account new reservations, cancellations, and downgrades, MRR refers to the total income anticipated from customers each month. This KPI’s ultimate goal is to demonstrate what a SaaS company’s income would be in the event that it discontinued its marketing and sales operations. In comparison to other more common revenue measures, it is particularly helpful for predicting future revenue and provides SaaS enterprises with a much clearer view of their business’s financial situation.
Take your current MRR (also known as from last month), add new known bookings, and remove recognized cancellations and downgrades to get your CMRR. As a result, CMRR offers a more accurate view of a SaaS company’s real financial situation than MRR because it accounts for predicted attrition over the measurement period. You may utilize either MRR or CMRR based on what you want to do since MRR is preferable for presenting a gross overview of revenue because it does not take into account projected cancellations, upgrades, and downgrades.
This statistic might be modified to determine committed annual recurring revenue (CARR) for SaaS businesses that sell subscriptions on an annual basis. This statistic might be modified to determine committed annual recurring income for SaaS businesses that sell subscriptions on an annual basis.
Lead Velocity Rate
Lead velocity rate (LVR), a gauge of your pipeline development, is the increasing percentage of qualified leads generated by your business over a certain period of time. If the lead velocity rate is poor or even negative, it indicates that your sales staff are not generating sufficient qualified leads to support ongoing revenue growth. Because of this, LVR is a crucial statistic for SaaS companies to monitor in order to assess the effectiveness of their sales team and forecast future growth.
Customer Acquisition Cost (CAC)
The CAC calculates the average cost of acquiring a new client for your business. The cost of acquisition includes the price you pay for any paid advertising you do to bring in new clients as well as the price you pay for the man-hours and materials your sales team uses to acquire new clients.
It can be challenging to compare your CAC to the market average because SaaS CAC standards can differ significantly based on the size of the business and the cost of the item it is selling (a business selling a $200,000 corporate product, for instance, would be absolutely satisfied with a $20,000 CAC whereas a business selling a $10,000 item would not).
Cash is one of the most intriguing KPIs for SaaS organizations and is sometimes ignored despite appearing straightforward. Why, you ask? Because developing a great product requires time and money, and the return on the investment will take a very long time. Like the majority of other businesses, SaaS owners need to be cognizant of their financial reserves. If they don’t, they’ll wind up overpaying, and the business could require outside funding to survive.
Cash may be a challenging KPI to monitor, especially in B2B when the majority of transactions are dependent on subscription services or recurring payments. However, it’s essential to monitor your cash inflows and comprehend changes. You will receive highly useful insights into your personal, team, and organizational performance by tracking your most crucial indicators, whether it be a statistic like cash or a KPI necessitating complicated computations. They must be easy to understand for the people who use them and visualization is best!
Customer Satisfaction KPIs
Businesses across all sectors need to provide excellent customer support, but SaaS providers providing sophisticated products with long learning curves should take this responsibility particularly seriously. Here are eight helpful KPIs to monitor if you want to evaluate the effectiveness of your customer service and customer success teams:
Customer Lifetime Value
LTV for a consumer is among the most crucial measures for knowing your clientele. It aids in the decision-making process when it comes to marketing, sales, design and development, and customer service.
Thus, LTV is directly impacted by turnover. Your LTV will double if you can reduce your churn rate.
LTV is crucial for determining the viability of a SaaS company’s business plan. While CAC is much more than LTV in an unbalanced company plan, it is considerably less than LTV in a balanced model.
Net Promoter Score (NPS)
NPS, which is a simple evaluation of how likely consumers are to suggest your business or its product to others, is one of the most often used metrics for gauging customer satisfaction and loyalty. You must employ customer feedback that is distributed to users of your product after a predetermined amount of time if you want to measure NPS.
Customer Retention Rate
The number of consumers that continue to subscribe to your product is known as your customer retention rate, and this statistic may reveal a lot about how happy your current clientele is. Merely divide the overall number of clients who were enrolled at the start of the prior month by the proportion of those customers who stayed subscribed at the conclusion of the previous month to calculate the customer retention rate.
Amount of Active Users
A simple way to determine how many clients are continuously accessing your SaaS product is to count the number of active users. You will need to determine what makes an active user utilizing data like features used and frequency of usage as there is no common definition for what distinguishes an active user from an inactive one. The amount of active users is a measure that, once defined, may assist you in assessing the state of your current client base.
The quantity of tickets generated for your business is more indicative of the effectiveness of your customer success team and product quality than it is of the effectiveness of your consumer support staff. The overall number of tickets generated is still a crucial KPI to monitor for customer support.
It can assist you in determining customer happiness and finding issues with the product and/or the product-related material you give clients, such as tutorial videos or manuals. You can choose the ideal size for your customer service and customer success teams by keeping track of the number of tickets that are produced.
Median First Response Time
The average amount of time it takes for a customer care representative to respond to a customer service request is known as the average response time. Maintain your median response time as short as you can in order to maximize customer satisfaction with increasing numbers of consumers expecting a first response of under four hours.
Median Resolution Time
Median resolution time is a measurement of how long it takes your support staff to resolve a problem, as opposed to average response time, which is the amount of time it takes agents to respond to a customer service ticket initially. Although customers are often significantly more patient with resolution times than they are with first response times, a short average resolution time remains a crucial component of superior customer service.
The importance of SaaS KPIs
You can track data regardless of the sector you work in, whether it be sales, marketing, consumer experience, or anything else. The ability to quickly and clearly visualize KPIs is crucial for the majority of businesses, particularly in the growth stage. As you decide which SaaS KPIs to measure, you can get better visualization by employing a dashboard, a powerful tool which can be vital for a company’s performance.
With so many data options available, it won’t be long before you’re overwhelmed by waves of metrics and their related acronyms, like lifetime value (LTV), annual recurring revenue (ARR), and customer acquisition cost (CAC), to name just a few of the more popular ones. Finding the greatest KPIs might be difficult for those who are just starting out in the industry.
Which of these criteria can you consequently trust to determine if your investment was successful or unsuccessful? Simply said, it depends on a wide range of things specific to your business goals. But once you’ve got a robust KPI system in place, you can focus more on what you do best, which is offering the greatest SaaS products!
It’s critical that you track the KPIs that have the most impact on the expansion of your company. Although this is a terrific place to start, you must really apply this data if you want to see results! If you aren’t going to take action in response to these indicators, there is no use in tracking them.
Centralizing all of your KPI data from your marketing, sales, support, and telephony tools and systems is the best method to do this. Then display them on information dashboards so that your staff can really utilize the simple charts created from this complicated data!
If you need a hand getting set up with KPIs that will ensure your marketing department functions as a well-oiled machine to profitably grow your business, Roar CMO has the experts you need at hand. Schedule your no-cost discovery call today, and we’ll show you how to get started!