Get the SaaS metrics you need
With all of the metrics that SaaS reporting tools offer, how do you know which ones are the ones you need to pay attention to? How do you take these important statistics and turn them into actions that will grow the size of your business? Let's take a look at six of the most important KPIs.
Your average revenue per user is considered by some to be a meaningless statistic. It's true that there are deeper statistics that will provide you greater insight, but ARPU is a great metric for measuring the general health of your business. You can see more about ARPU and how you can use it to fuel growth in a previous blog post.
Your conversion rate is the ratio of people who visit your site versus the people who become paying customers. This metric is important for calculating how many visitors you need on your site in order to hit specific revenue goals. It is also vital in determining whether your sales funnel needs improvement and measuring the success of your tweaks to it.
Your churn rate is the percentage of customers you lose in a given time frame. A high churn rate can be a symptom of many problems, so it's important to keep an eye on it. A high churn rate can highlight an issue with your customer retention strategy. This could be prices that are too high, software that is difficult to learn, or any number of problems. As you begin to narrow down and address the problem, your churn rate will be a guide for measuring your success and failures. For more on churn rate, check out this blog post.
MRR and ARR
Like ARPU, your monthly recurring revenue and annual recurring revenue (MRR and ARR) are another set of important metrics about the general health of your company. Also, like your ARPU, a deeper look at them can provide some insights that go beyond general financial health. We go in-depth about MRR and ARR here.
Customer acquisition cost refers to how much you must spend in order to acquire a customer. It is the total cost of your marketing and sales expenses divided by the number of new users you signed up. This, along with LTV, is an important metric in determining your pricing strategy. You must make more per customer than it costs to acquire them.
The lifetime value of a customer refers to the total amount of money that a customer will spend with you from the time they sign up to the time they cancel it. The customer lifetime value should be at least five or six times higher than the cost of acquiring that customer. Regular re-evaluation of your pricing strategy and tweaks to it informed by these two metrics, especially in the early phases of your business, will help maximize growth.