The main goal of starting any business is ensuring continuous growth and success, but the bigger a company gets, the more complicated it becomes to keep track of everything. From finances to products and even to the customers themselves, there needs to be a system that monitors everything going on to make measuring the company’s performance easier.
SaaS metrics (software-as-a-service) is a business model that monitors a business’ growth. SaaS focuses on helping companies to identify their profits and develop customer loyalty to ensure long-standing success.
This article will explain SaaS metrics, why they’re necessary, and showcase the standards by which SaaS metrics measure your business’ success. So, let’s get into it.
What Are SaaS Metrics?
SaaS metrics are a business model companies implement to produce better results. This business model helps companies keep long-standing customers, find new customers, and keep profits from dipping into negative numbers.
For example, let’s say you are a contractor or a consultant and want to use a PMIS (project management information system) or a management information system. Still, you don’t have the internal software capabilities to do those things yourself.
You would most likely be tracking your information using excel, or you might even be tracking it manually. To make your life easier, you would want software that aggregates everything.
You get a service provider that can link you to a subscription to SaaS metrics.
How It Works
The first thing to note about SaaS metrics is that most companies that offer SaaS use a subscription model. It’s software you pay for on a subscription basis, so you pay a certain monthly amount and then have unlimited service with no ads. It is similar to Netflix or streaming service in that regard.
You can always negotiate your terms and conditions with the service provider.
Software providers try to make their business model subscription-based rather than one-time fees, giving them recurring revenue.
SaaS Metrics Usage
Saas metrics strive to achieve long-term customer relations and customer success. The longer a customer uses a company’s product or service, the more their value will increase to said company.
Long-term customers are assets. The more a company can maintain customer loyalty, the more revenue it will produce. SaaS metrics help better understand the relationship between the customer and the company and learn how to refine its strategy to replicate such results with other customers.
Benefits of Using SaaS Metrics
The smaller and more contained something is, the easier it is to keep everything in check and study all its angles. However, the bigger something gets, the easier it is to lose track of particular directions.
SaaS metrics ensure all aspects of your work are accounted for and considered. This simple monitoring, in turn, will allow for a better understanding of the customers, the market, how best to approach any issues, and which methods to use for the most satisfactory results.
SaaS Metrics vs. Traditional Business Metrics
Financial metrics evaluate business performance. SaaS metrics are more complex than traditional metrics. Moreover, they rely on vital variables that can significantly change the results.
For example, whereas traditional metrics focus more on acquiring a customer and making their purchase, SaaS metrics concentrate on keeping a customer and having them return.
The Essential & Most Popular SaaS Metrics
Here is a list of the most popular and successful SaaS metrics through which you can measure your business’ success:
- Customer Lifetime Value (CLV)
- Customer Acquisition Cost (CAC)
- Churn Rate
- Monthly/Annual Recurring Revenue (MRR/ARR)
- Net Promoter Score (NPS)
- Customer Retention Rate
- Number of Active Users
- Activation Rate
- CAC: CLV Ratio
- Average Revenue Per User
- Return On Investment (ROI)
Along with a few others not mentioned here, these are the general metrics to look out for to advance your business.
In the end, a company’s priority is success and continuous growth. SaaS metrics act as a guide to steering companies in the right direction. It’s encouraged and, at times, crucial to implement such a business model in your, hopefully, blooming business.