SaaS Industry has witnessed immense growth over the years and we know it’s here to stay! But with growth, SaaS services also need to focus on their potential and how competent they are for market saturation. SaaS sales is challenging, as you need to attract huge number of quality leads as well as find ways to retain and increase lead volume for upcoming years.
Here, we are going to review key SaaS metrics every SaaS development company needs to measure and act upon.
- Net MRR (Monthly Recurring Revenue) Growth Rate
As a business, your SaaS development services need to be sustainable. SaaS industry can have a steady cash flow from customers’ monthly subscriptions, but only when it survives for long.
This is why it’s important to track monthly recurring revenue, rather than just monthly revenue. Net MRR Growth Rate will show you month-over-month increase in % of net MRR. The value of MRR keeps changing as new revenue gets added or customers churn, and growth rate will show net variation of these factors monthly.
Net MRR growth rate helps you track how rapidly your SaaS Company is growing.
Net MRR Churn Rate measures lost revenue month-over-month minus revenue from expansion or upgrades. SaaS companies need to minimize MRR churn down to zero or even negative to boost growth.
- Average Revenue Per Account (ARPA)
ARPA is the measure of revenue that’s generated from every account, calculated monthly or yearly. Often, it is also termed as ARPU (Average Revenue Per User) or ARPC (Average Revenue Per Customer). A customer can possibly have multiple accounts, so these metrics differ from ARPA.
ARPA helps you check and monitor average price point your new subscribers choose.
- Lead Velocity Rate
Lead Velocity Rate (LVR) is month-over-month growth percentage of qualified leads. LVR lets you know amount of potential leads that you will work on and convert into paying customers. In short, it will track your qualified sales pipeline development and help you estimate future growth.
- CAC Payback Period
CAC Payback Period is the measure of number of months taken to earn back acquisition costs (the amount invested to acquire leads). This metric determines how much cash your business needs in order to grow.
- Cost Per Acquisition
Campaigns are quite expensive and utilizing wrong channels can make your profit margins even worse.
To overcome this, it’s essential to track Cost Per Acquisition of marketing campaigns. For that, simply add all your marketing and sales expenses of last month and divide it by total number of acquired customers for the same period. The result will be average amount spent on each new customer. This metric helps you understand which campaigns actually drive traffic and acquire more customers and which ones don’t.
These important KPIs can be implemented across all SaaS company types, but you need to measure them frequently in order to scale over the years. Set benchmarks for each one of them to track your SaaS business growth.