Measuring business performance in the SaaS industry is not as straightforward as in traditional commerce. Whether it is acquiring customers, onboarding them, increasing customer lifetime value or getting them to renew, the SaaS funnel offers challenges at every step.
Knowing what KPIs to track can help reduce uncertainty and allows for the development of growth plans based on actual company data. We’ve set about trying to simplify performance tracking for your SaaS business with an inclusive set of resources on the most important SaaS metrics to track.
Our third episode of this resource eBook, the newly published The Definitive Guide to SaaS Metrics: Monetization will help you understand monetization metrics, so you can determine how well your business is maximizing the value of your audience. In SaaS models, where monthly/annual recurring revenue is critical for a company’s success, understanding and using these metrics is essential.
Our newly launched resource focuses on monetization metrics, including helpful formulas for calculating and tracking them:
Monthly Recurring Revenue (MRR), one of the most important SaaS metrics for your business. It’s how much revenue you’re bringing in each month based on your existing subscriptions and the rate of new additions. This metric will give you insights into your overall business strategy, information valuable in determining the direction of your product development, inspiring your sales initiatives, and revealing your financial health.
Annual Recurring Revenue (ARR) is another key metric to track, and is simply the amount of revenue you’re bringing in over a 12-month period; companies with more than $10 ARR will be more concerned with an annual metric than a monthly metric (MRR).
Net MRR growth rate measures the monthly increase in net MRR, and can be a good indicator of your company’s growth. It is often looked at by investors to determine the potential for a SaaS startup.
Expansion MRR rate can reveal the additional recurring revenue through existing customers via upsells, add-ons, and cross-sells. The higher the percentage, the more likely your customers are getting value from your product and are motivated to upgrade their subscriptions.
Annual Contract Value (ACV) is the annual value your customer contracts bring in each year, and is important because if you can grow this number, acquiring new customers is less crucial.
Annual Revenue Per Account per month (AAPA) shows the average revenue you take in from each individual customer each month.
CLTV:CAC ratio will help show the return obtained on customer acquisition spending, and can reveal the effectiveness of your sales and marketing spending.
Months to Recover CAC – Gross Margin Payback Period (GMPP) shows you how long it takes you to recover the cost of acquiring a customer, or when customers start to bring you ROI.
Monetization metrics are vital to understanding and guiding your company’s development. Read 2Checkout’s The Definitive Guide to SaaS Metrics: Monetization eBook to better understand these metrics and how they are calculated, so that you can perfect your SaaS company’s market approach.