A measure of how many employees leave a business over a given period of time. Expressed as a percentage, a business' attrition rate is the number of employees that leave in a given period, divided by the average number of employees, multiplied by 100.
A measure of the revenue generated by each user over a given period of time, taken as an average. ARPU can be used by any business, but it's more relevant for those with a recurring revenue model, such as subscription companies.
The loss of customers is known as customer attrition – it's an important indicator of the health of your business, whichever industry you're in. In SaaS, attrition is commonly referred to as customer churn.
When a prospect makes payment or signs the contract, a deal can be marked as ‘closed-won'. But if they choose an alternative solution, the deal is considered ‘closed-lost'. A sales rep’s ratio of closed-won to closed-lost shows how efficient they are overall.
The amount it costs to produce and deliver the product or service you sell. Understanding COGS in your business will help you to calculate your gross margin - that is how much you’ll have left for other services/aspects of running your business
The money a business spends to secure a new customer. CAC is important because it is a signifier of profitability and customer revenue. If CAC is low and the revenue you make from a customer is high, profitability will be high, and vice versa.
The total revenue a typical customer will bring in during their relationship with your company. A metric essential for evaluating the potential success of a SaaS business and the foundation of subscription-based business models.
The percentage of your customers that take out a new subscription after their current contract has expired. It is a key SaaS metric because the longer a customer continues to subscribe, the more profitable they tend to become.
Customer retention rate is the rate your business retains customers over a certain period of time. It’s the most straightforward method of measuring customer retention, and gives you an idea of how well your current strategy is working.
A measure of how happy customers are with different aspects of your business, for example, your product or customer support. Usually expressed as a percentage, results are gathered from customer satisfaction surveys.
The measures of an investment or financial metric's annual growth rate over a set period of time that's longer than a year. This growth rate accounts for the reinvestment of profits at the end of each financial period.
A measure of how connected employees are to a company and the work they are doing. Insights are usually gathered by an employee engagement survey, the results of which can be used in conjunction with attrition.
Sometimes referred to as expansion MRR rate, this is the amount of additional recurring revenue from existing customers you generate in a month. It includes any add-ons, cross-sells or upsells made by your customers.
Gross margin is your total revenue minus the cost of goods sold (COGS). It’s a useful metric for tracking your revenue streams and forecasting. SaaS businesses can also look at recurring revenue gross margin.
A lead that Marketing has vetted in some way to deem them more likely to become a customer than others. Criteria can include behavioural and demographic data, like web pages visited, CTAs clicked, associated company, and job title.
How much recurring revenue from current customers you retained over a given period of time. Sometimes referred to as net dollar retention (NDR) , understanding this metric is key for SaaS leaders looking to assess how secure their business is.
NPS measures customer experience. Participants are surveyed on how likely they are to recommend your product to a friend. Responses are sorted into three categories: detractors, passives, and promoters. Subtract the percentage of detractors from the percentage of promoters to arrive at your total NPS score.
The time it takes for a customer to become profitable (or break even). Payback period is important to all SaaS businesses as it directly impacts cash flow. A long payback period will negatively impact cash flow, and reducing it will improve how much money you have to play with.
A lead who has experienced meaningful value using your product through a free trial or freemium model and therefore more likely to become a customer than other leads. An important metric for businesses pursuing product-led growth.
The number of prospects who, according to sales cycle data, are ready to talk to a sales rep. The criteria for a prospect becoming an SQL will vary according to your specific product, sales cycle, and target audience.
The portion of a business's total addressable market (TAM) that is possible for you to acquire given your business model and product in its current form. SAM is useful for determining longer-term growth targets.
The portion of your serviceable addressable market (SAM) that you can realistically capture. It should include those who would benefit from buying your product or service in its current form. SOM is useful for determining short-term sales targets.
Sometimes known as total available market, TAM is the total number of potential customers for your product times its annual selling price. It's a metric VCs pay close attention to because it determines a company's revenue potential.
The maximum price that a customer is willing to pay for a product or service. By calculating and tracking WTP, you can optimize your pricing plan and your product localization to ultimately achieve optimum revenue for your business.