The success of any software-as-a-service (SaaS) business depends on its ability to measure and track key performance indicators (KPIs). Tracking these KPIs is essential for understanding the health and growth of a SaaS company, identifying areas of improvement, and making data-driven decisions. Three basic but very important operational metrics that all SaaS businesses should be tracking are customer acquisition cost (CAC), monthly recurring revenue (MRR), and churn rate. Let’s run through these three metrics and why they’re important for SaaS businesses.
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1. Customer acquisition cost (CAC)
Customer acquisition cost (CAC) is the total cost associated with acquiring a new customer. It’s an important metric for understanding how much it costs to acquire new customers, which can help a SaaS business make better decisions about marketing spend and customer acquisition strategies. CAC is calculated by dividing the total cost of sales and marketing activities by the number of new customers acquired during that period. Factors that can affect CAC include advertising costs, sales commissions, discounts, and other promotional expenses.
Tracking CAC using a marketing automation solution can help a SaaS business understand where their money is going and make more informed decisions about their customer acquisition strategies. For example, if a SaaS company notices that their CAC is higher than expected, they may decide to focus more on organic growth or invest in more targeted advertising campaigns.
2. Monthly recurring revenue (MRR)
Monthly recurring revenue (MRR) is one of the most important metrics for any SaaS business because it represents the amount of revenue generated from recurring subscriptions each month. MRR is calculated by multiplying the number of active subscribers by the average subscription fee per month. It’s an important metric because it helps a SaaS business understand how much revenue they can expect each month from existing customers and plan accordingly for future growth.
Tracking MRR can also help a SaaS business identify areas where they need to improve their product or services in order to increase customer retention rates. For example, if a SaaS company notices that their MRR has been declining over time, they may decide to invest in improving customer support or developing new features that will keep existing customers engaged with their product or service.
3. Churn rate
Churn rate is another important metric for any SaaS business because it measures how many customers are leaving each month due to dissatisfaction or lack of engagement with the product or service. It’s calculated by dividing the number of customers who cancel during a given period by the total number of active subscribers at the start of that period. Tracking churn rate can help a SaaS business identify areas where they need to improve their product or services in order to reduce customer attrition rates and improve retention rates. For example, if a SaaS company notices that their churn rate has been increasing over time, they may decide to invest in improving customer support or developing new features that will keep existing customers engaged with their product or service.
Get granular reporting with ERP solutions from Annexa
If you’re looking more fine-grained means of tracking metrics in your SaaS business, get in touch with us. Our NetSuite ERP and marketing automation solutions have helped partners turbocharge growth over and over. Get in touch today to discuss how we can help.
Annexa is a leading NetSuite partnerwith extensive experience designing and implementing comprehensive and customised business systems, includingpayroll solutions, financial management, warehouse management and ecommerce solutions.
