As a SaaS business owner, you have to make informed decisions to stay ahead of competitors and boost overall performance. You can do so only when you have access to the data. Tracking and analyzing crucial SaaS metrics will provide you with useful insights that help in strategic decision-making.
There are hundreds of metrics out there that many businesses track. Similarly, the list of SaaS metrics is also very long. However, you cannot track and analyze all of them. You need to choose some crucial SaaS performance metrics that align with your goals and calculate them.
Now, the main concern is choosing SaaS performance metrics. Don’t worry! We are here with a detailed guide on it. Let’s delve into it without further ado.
A Stepwise Guide to Choose SaaS Performance Metrics
Step 1: Define Your Business Objectives
The first step you need to follow is defining your business objectives. It will help a lot in the selection of metrics. Whether your focus is on growth, retention, or profitability, your metrics should directly reflect these goals. For instance, if your aim is customer acquisition, prioritize metrics like user growth and customer acquisition cost (CAC). Similarly, to increase revenue, you should select metrics like MRR, churn rate, and ARPU.
Step 2: Identify Key Performance Indicators (KPIs)
After defining objectives, you have to identify KPIs. It will help you measure the progress toward these goals. KPIs are crucial for tracking performance and making informed decisions. Choose KPIs directly linked with your objectives and offer clear and actionable insights. For example, if you want to retain more customers, churn rate and customer lifetime value (CLV) would be important KPIs to track.
Step 3: Evaluate the Customer Journey
The next step is evaluating the entire customer journey. It will ensure that you’re tracking metrics at each stage. You should focus on all stages, such as acquisition, onboarding, and retention. For example, during the acquisition stage, you might track metrics like conversion rates. This comprehensive approach helps identify areas for improvement.
Step 4: Consider Your Products
To make informed decisions, you should know about your products and how well they fit the market. Therefore, you should choose metrics related to your products’ performance. Customer satisfaction scores (CSAT) and product usage metrics are crucial ones regarding this. Monitoring them allows you to understand how customers interact with your products and whether they meet their needs effectively.
Step 5: Prioritize Actionable Metrics
You should always focus on actionable metrics. It means that you should opt for metrics that provide useful insights, leading to specific actions or improvements. It would help if you avoid metrics that don’t help in making informed business decisions. For instance, tracking daily active users (DAU) provides actionable insights into user engagement. Meanwhile, total website visits may not directly impact your decisions.
Step 6: Refine Metrics
Your job isn’t done after selecting SaaS performance metrics relevant to your business. You have to review and refine them to ensure they stay relevant as your business evolves. You have to adjust metrics as your SaaS company grows. It‘s mandatory to align with new goals or market conditions. Regularly updating your metrics ensures they provide the most valuable insights.
10 Most Important Metrics for Every SaaS Company
The aforementioned guide will help you choose the metrics based on your specific requirements and objectives. However, there are some crucial metrics that every SaaS company should track and analyze. These are:
1. Trial Conversion Rate: It indicates the percentage of trial users who convert to paying customers. It helps you estimate the effectiveness of your product and onboarding process.
2. New Trial Sign-Ups: This metric shows the number of users signing up for a trial period within a specific period.
3. Number of Active Users: It tracks the number of users actively engaging with your product.
4. Churn Rate: It’s the percentage of customers who stop using your service within a specific period. It’s inevitable and impacts the revenue generated by your company.
5. Monthly Recurring Revenue (MRR): This metric reflects the monthly revenue from subscriptions. It’s important for forecasting and assessing business growth.
6. Annual Recurring Revenue (ARR): It’s similar to MRR. The only difference is that it’s calculated for the whole year.
7. Customer Acquisition Cost (CAC): The average cost of acquiring a new customer is shown by this metric.
8. Customer Lifetime Value: It’s the total revenue you are expected to generate from a customer during their lifetime.
9. Retention Rate: The percentage of customers who continue using your service over time is the retention rate.
10. Cancellation Reasons: This isn’t a specific metric. However, you need to reduce the churn rate.
You can track and analyze all these metrics using Baremetrics. It’s a reliable tool that can help you track more than 26 SaaS metrics and make I-formed decisions. You can get its free trial now by signing up.
