Top 5 SaaS Metrics You Should Know About
If you have a Saas business or if you are planning to start one, there are several metrics you should really know about. If you look at the fastest growing Saas companies, you can see that they do know what metrics to track and improve. Here are the top 5 metrics you should know about.
MRR
MRR stands for monthly recurring revenue. Monthly Recurring Revenue is a fundamental metric for every SaaS business. Once your company acquires a new customer, it will provide recurring revenue for you, and this will be recorded under your MRR.
This metric is different from the traditional revenue because once your customers make a purchase, you don’t have to be worried about making another sale to him/her again. This customer will provide a steady monthly income (recurring) without the need of creating a continuous sale. In this scenario, you have to be concerned about things like retention and churn.
Calculating the MRR is very straightforward. I will give you an example of calculating it rather than giving you the theory behind (You can ask the theory behind it to your Mr Startup Professor).
Let’s say that you have two subscription plans. One is starter edition which costs $10 per month, and another one is pro, which costs 20$ per month. You have 20 customers with starter plan and ten customers with a pro plan so your MRR would be (20*10) + (10*20)= $400.
Net MRR Churn Rate
This metric measure the revenue you lost on a monthly basis due to the cancellations to your services plus any expansion from the upgraded subscriptions. In simple words, its revenue churn minus revenue added.
MRR Expansion Rate
As the name suggests, Expansion MRR Rate is the extra revenue added from your existing customers through upgrades and add-ons. Expansion MRR is crucial because it’s a good indicator of the company’s ability to provide additional value to customers while monetising it.
Average Revenue Per Account (ARPA)
ARPA measures how much revenue is generated per customers. It can be calculated monthly or yearly. You need to track this metric to see how much money you are generating from the newly acquired customers compared to the previous customers. The trend of your ARPA should be going upwards.
CAC Payback Period
CAC is your customer acquisition cost. It shows how much money you spent to acquire a customer. CAC Payback Period shows how much time is required to earn back the amount you invested in to acquire the customer.
Long CAC Payback Period could lead to cash flow problems and when this happens startups need to get investment to operate their businesses. Shorter CAC Payback Period is what you should be aiming for.
Don’t forget the fastest growing startups are tracking and focusing on these five metrics. You can calculate all the metrics mentioned here by using our platform
