What are the most important metrics for SaaS?

cchecca

I’m doing some work for a small SaaS company, and the owner is trying to get a better handle on the actual business side of his company. What are the key metrics that a SaaS provider should look at to gauge the health of his business?

Tags: KPI, metrics, SaaS
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jhotz
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I think it is easy to establish too many metrics, so that you end up being flooded with information without really determining which ones matter. Also, what matters is going to differ from business to business. If I were going to pick three metrics for a SaaS business, these are the top three I would probably focus on:

1. Churn. How many customers are coming back month after month and how many are leaving. Not only does this make revenue projections easier, it provides a window into how your customers perceive your business. If they are pleased with your services, the churn rate will be lower.

2. Average revenue per customer. You have to have a handle on the financials, and it helps to see the impact of cross-sells, up-sells, etc. 

3. Monthly recurring revenue. It helps to have a firm grasp on your revenue stream, and you need to be able to predict future revenue with some degree of accuracy.

Laura
Vote Up (2)

SaaS/subscription businesses are more complex than traditional businesses. Traditional business metrics totally fail to capture the key factors that drive SaaS performance. In the SaaS world, there are a few key variables that make a big difference to future results.

The goal is to answer the following questions:

  • Is my business financially viable?
  • What is working well, and what needs to be improved?
  • What levers should management focus on to drive the business?
  • Should the CEO hit the accelerator, or the brakes? 

What is the impact on cash and profit/loss of hitting the accelerator? When you find answers to the above quest then you resolve it yourself.

 

jimlynch
Vote Up (1)

The 5 “Must Have” Metrics for Your SaaS Business
https://blog.kissmetrics.com/5-metrics-for-saas/

"There’s an acronym out there: KPI. It stands for Key Performance Indicators.

It’s a fancy way of saying “the most important metrics for tracking your business.”

But if you research KPIs and try to figure out which metrics are the most important ones for your business, you will find HUNDREDS of these things. I regularly stumble across blog posts with headlines like “The 50 KPIs You Need to Be Tracking Right Now.”

Guess what? Those posts are a complete waste of time.

Here’s the deal: you need to carefully select the key metrics you will use to measure the success of your business."

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