The recent explosion of business intelligence and analytics tools has resulted in organizations measuring everything under the sun even if it is unclear what the metric is telling you or how to best leverage it. We often find that the problem is not a lack of KPI’s, rather too many KPI’s.
In this case, more is not always better. For most businesses 5-10 KPI’s is enough to capture the trends, identify areas of opportunity and dig further into those areas. Too many KPI’s will take your attention away from the most important data and paralyze a business. You can also download our top 10 SaaS Metrics Tool to better understand how to calculate each metric and why measuring it is critical for your SaaS business. Think about all the daily, weekly, monthly and quarterly reports you review. Are strategic decisions being made from these reports?
Let’s simplify and walk before we run, here are SBI’s top 10 SaaS metrics you should be measuring today. These metrics, once put into operation will be the key to strategic business planning.
Top 10 SaaS Metrics
- CMRR – Committed Monthly Recurring Revenue: CMRR looks at current MRR, (New Business + Expansion – Contraction – Churn), then adds in signed contracts going into production and subtracts out revenue that’s likely to churn within that period.
- CAC – Customer Acquisition Costs. This is comprised of all Go-to-Market costs, including Product, Marketing and Sales that are focused on new customer acquisition. This can be rendered at the customer and unit/user level.
- CLTV- Customer Lifetime Value. The value of gross margin the customer will bring over the lifetime of the subscriber. This can be rendered at the customer and unit/user level.
- CLTV:CAC Ratio – This is the Lifetime Value of the Customer or User / Customer or User Acquisition Costs. In a SaaS business, sweet spot for this ratio is of 3:1 – 5:1.
- CAC Payback – The number of months it takes your company to earn back the CAC you spent to get a new customer. 12 months is benchmark Payback for SaaS companies.
- Bookings/Head – The bookings the company/division/channel is achieving against the weighted average headcount. This will provide visibility to rep productivity & effectiveness over time.
- Magic Number – A magic number of 1 means that last quarter’s sales & marketing spend will be “earned” back over the next 4 quarters in incremental revenue, and is seen as the desired metric for SaaS businesses.
- Customer Churn – SaaS churn is the percentage rate at which SaaS customers cancel their recurring revenue subscriptions.
- Pipeline Velocity – Pipeline velocity metric gives predictability in sales results in present and future quarters.
- Time to Productivity – This metric measures the length of time from when a rep is hired to when the rep starts to contribute bookings to MRR against his/her goal. This will inform the company the speed it needs to hire to achieve the company’s objectives.
How many of these 10 metrics are being measured today? How many are being measured, but are not used to drive strategic decision making? Simplify your KPI’s and focus on SBI’s top 10 SaaS metrics in 2018.
Download our top 10 SaaS metrics tool to better understand how to calculate each metric and why measuring it is critical for a SaaS business.
If you have questions or would like help calculating and benchmarking where you stand our team of experts can assist. Bring your leadership team to see me and a hand-picked team of experts in Dallas at , SBI’s executive briefing center.