As a young, growing company ourselves, we understand the challenges that startups routinely face. And since our expertise lies in helping tech startups, we also understand the metrics that all SaaS (software as a service) companies need to track if they want to make it in the long run.
The most important key performance indicators (or KPIs) for SaaS businesses are those that track success and growth. Every SaaS company will want to track churn rates and revenue. Ultimately, there are dozens of KPIs any business can track, so each SaaS company should develop their own customized metrics to ensure success.
Let’s jump into what SaaS businesses need to know about KPIs.
SaaS Business KPIs To Track Success
If you’re in the SaaS space, then happy customers are your bread-and-butter. You simply won’t succeed unless you can keep a high percentage of subscribers.
That’s why any list of critical KPIs for SaaS businesses worth its salt with start will start with your Churn Rate. This will measure your amount of lost customers, usually on a monthly basis. Understand this number, and you’ll understand whether customers are sticking around – and for how long. This is critical information you can use to adjust rates, adjust customer service, and adjust your product as necessary.
Similarly, you should also be tracking your Revenue Churn Rate, especially if you have tiered pricing and some customers pay more than others. Tracking your Revenue Churn Rate can help you see if you’re losing too many of the wrong customers each month.
SaaS Business KPIs To Track Growth
Presumably, you’re running your SaaS company because you’d like to make money. That’s why you’ll also need to follow KPIs that illustrate your revenue, along with how much its growing over time.
First, you’ll want to track your Monthly Recurring Revenue (MRR). When you’re a SaaS, it’s easy to miss the forest (ie.: your revenue) for the trees (ie.: your subscribers). MRR tracks your revenue flow (including sales, upsells and renewals), and it can help keep you focused on what really matters.
Of course, you’ll also want to track your Annual Recurring Revenue (ARR). Now, like many KPIs, this one requires a little math and a little forecasting, because you still want to track this ‘annual’ number on a monthly basis. Basically, you’ll take your MRR and multiply it by 12, which will give you a projected annual revenue. This can give you an incredibly useful picture if you track it regularly.
How To Choose SaaS KPIs To Track
The beauty of KPIs is that they let you see at a glance how your company is doing. The churn rates and revenue rates we mentioned above are critically important for SaaS companies, but there’s an almost overwhelming number of other indicators you can track: Lead Velocity Rate, Customer Acquisition Cost, Organic vs Paid Traffic ROI, Monthly Unique Visitors, Signups, Number of Support Tickets Created, Average Revenue Per Account, Conversion Rate to Customer, Cash Burn Rate, and Net Dollar Retention, just to name a few (phew).
The reality is that each SaaS business is unique. By accessing strategic and expert financial guidance, working with a virtual CFO can help simplify this process.
And remember that measuring KPIs is only half the battle. You’ve still got to track them, and understand them, so that you can use them to actually make meaningful changes to your SaaS company as necessary. Learn more about how to use KPIs to measure business success here.
We also offer monthly KPI Metric Reviews in some of our virtual finance packages. This consistent monthly reporting can help with projections, and we also offer guidance and support to help you understand your data and best use it to make informed decisions. We provide virtual CFO services like this for startups across Canada, America and Europe. Contact us to learn more.