In the past seven years, the SaaS industry increased by 500%, and in 2023 it will be worth $195 billion. As a SaaS business owner or product manager, you know that tracking key metrics is essential to success. But what are the most important metrics to follow, and which tools can help you do it?
In this blog post, we'll break down the key metrics to track for SaaS businesses and introduce five tools that can help you monitor them.
The SaaS world is super-competitive, so if you do not track your key metrics, your competitors will do that for you and grow. Owning a SaaS business is like being a shark: you die if you stop.
Data is essential for SaaS companies because it can help track and monitor key metrics that allow them to improve a product and grow a business. Without that, you’ll not be able to make data-driven decisions.
If you know the critical metrics for your business, you'll be able to understand:
The most important metrics to track include customer churn, customer lifetime value, and average revenue per user. These metrics can vary depending on your business model, but they all give you valuable insights into your business performance.
Key SaaS metrics will come in handy if you are trying to figure out how your business is doing or want to find new growth opportunities. There is no need to track all the data if it does not give you any insightful information. It’s better to focus on the key SaaS metrics and what these numbers mean to your business. So, let’s take a closer look at the key metrics for SaaS companies below.
Revenue metrics are essential for any SaaS business. The most crucial revenue metrics to track are monthly recurring revenue (MRR), annual recurring revenue (ARR), customer acquisition costs (CAC), average revenue per user (ARPU), and churn rate.
Monthly Recurring Revenue is the total revenue a company generates from its monthly recurring subscriptions. MRR can track growth over time and help businesses measure the metrics of success of their marketing and sales efforts.
There are two main ways to calculate MRR:
For example, suppose you have 10 subscribers on the $300/month plan. The MRR will be:
10*$300 = $3000
Annual Recurring Revenue is the total revenue a company generates from its recurring subscriptions annually. It can track growth over time and determine how healthy businesses do with their marketing and sales efforts.
How you calculate ARR will depend on the complexity of your business model and your existing pricing policy.
To calculate ARR, you can multiply MRR by 12:
Or you can calculate ARR based on the yearly contract.
For instance, if a subscriber signs up for a five-year subscription for $20,000, the ARR would be $4,000 for each calendar year.
$20,000 / 5 = $4,000
Customer Acquisition Costs is a metric that helps SaaS businesses track how much it costs to acquire a new customer. This number is significant because it shows how efficient a company's marketing and sales efforts are.
To calculate CAC, you can take the total cost of marketing and sales divided by the number of new customers. You can see a CAC formula below:
ARPU is the average amount of revenue generated per user. It shows how much a SaaS business makes on average per customer.
This number helps companies determine whether they are making enough money from their current customer base and whether they need to focus on increasing their ARPU. One of the most common ways to calculate ARPU is to take the total revenue from all customers and divide it by the number of customers.
Check out the ARPU formula:
Churn rate is the percentage of customers who cancel their subscription or do not renew their contract.
It can help companies to determine whether they are losing too many customers and whether they need to focus on retention efforts.
There are a few different ways to calculate churn rate, but the most common is the following: you need to divide the number of customers who cancel their subscriptions by the total number of customers.
For instance, if your company had 500 customers at the beginning of the month and lost 20 customers by the end, you would divide 20 by 500. So, the answer is 0.04. You then multiply 0.04 by 100, resulting in a 4% monthly churn rate.
Customer satisfaction is an essential metric for SaaS business. Businesses can track customer satisfaction with a few methods. One of the most common ways is to display an NPS *Net Promoter Score) survey inside of the product. You can check 20 NPS survey questions and answers to give you some ideas for your business. Or you can look at the number of open and closed support tickets or positive reviews left on SaaS product review websites.
By tracking customer satisfaction, businesses can determine whether their SaaS product meets customer needs and whether they need to make changes to improve the service.
Net Promoter Score is a metric that SaaS businesses use to track customer loyalty. For example, it can help SaaS companies to determine how likely customers are to recommend their SaaS products to others.
To calculate NPS, you can take the number of customers who would recommend your SaaS product to others and divide it by the total number of customers. Calculate it by the following formula:
Customer satisfaction (CSAT) is a critical metric for measuring a SaaS business's success. It can help you track how your customers feel about your product and identify areas where you need to make changes.
To calculate CSAT, you'll need to survey your customers' satisfaction with your product. You can use a tool like Google Forms or SurveyMonkey to create a survey and then send it out to your customers.
Once you have your survey results, you can calculate CSAT by taking the percentage of respondents who replied they were "satisfied" or "very satisfied" with your product.
Customer Effort Score (CES) is a metric that can be used to measure the customer experience in SaaS businesses. It is calculated by measuring how much effort the customer puts in to solve their problem, such as purchasing on the website.
Research shows 81% of people would rather say about the business negatively if interaction with this brand is "high effort." The lower the CES score, the better the customer experience.
Several factors can contribute to a high CES score, such as:
Improving CES can be challenging, but focusing on making the SaaS customer experience as effortless as possible is essential.
Some ways to do this include: offering live chat support, simplifying processes, and providing self-service options.
Usually, you need to conduct a survey and ask your client how satisfied they are with your services. Then, analyze the answers.
As a SaaS business owner, you know that tracking your metrics can be tricky - you see above that there are a lot of different metrics to track, and it can be hard to keep track of them all.
Fortunately, several great tools are designed specifically for tracking SaaS metrics. We'll look at five of the best SaaS metrics reporting tools.
Baremetrics provides detailed reports on your key SaaS metrics, including MRR, churn, LTV, and more. This makes it easy to track your progress and improve your business goals and KPIs.
Baremetrics offers many features, including customizable dashboards, detailed reports, A/B testing, email notifications, great data visualization, and SaaS analytics tools.
One of Baremetrics' unique features is its ability to track cohort analysis. Cohort analysis allows you to see how different groups of users interact with your SaaS product over time. This information can be important in understanding how to improve customer retention and grow your business.
Pricing: It's easy to use and has a great pricing plan starting from $129/mo. You can sign up for a free trial on their website.
ProfitWell is another great option for tracking your SaaS metrics. Their pricing plans are very affordable, and they also offer a free trial.
Like the previous tool, ProfitWell offers reports on all SaaS metrics, such as MRR, churn, LTV, and more. Besides, it provides some unique features, such as report templates and actionable insights.
For starters, ProfitWell has a "health score" that shows you how well your business is doing at a glance. It also has built-in integrations with popular tools like Salesforce (which many sales teams love) and Zendesk, making it easy to start with ProfitWell.
Pricing: ProfitWell starts at $49 per month, making it one of the more affordable options on this list. However, it's worth noting that ProfitWell does not offer a free trial, so you'll need to sign up for a paid plan to try it out.
ChartMogul is another popular SaaS reporting tool. It offers many features, including detailed insights into customer churn, lifetime value, business intelligence, and more.
One unique feature of ChartMogul is its "activation" metrics. These metrics measures how many new customers are activated each month, which can be valuable for tracking growth.
Pricing: ChartMogul starts at $99 per month, making it one of the more expensive options on this list. However, it offers a 14-day free trial, so you can try it out before committing to a paid plan.
Stripe is a popular payment processing service that also offers SaaS reporting tools. It's easy to use, and it helps businesses easily track their income and expenses. This can help you understand your business's financial health and to do decision-making about future growth.
Many companies find it helpful to automate their billing process. Stripe offers a variety of tools that make this easy to do. You can easily create invoices, set up recurring payments, and manage your revenue stream. This can help you save time and ensure that your billing process is smooth and efficient.
Stripe also integrates with other SaaS services, making it a convenient option for businesses that use multiple SaaS platforms. Stipe has quite a simple princess of API integrations compared to the other tools.
Pricing: They have various pricing plans, depending on your desired features. You can find more information on their website.
Just like Stripe, Paddle is a SaaS payment processor that also allows you to track and measure your SaaS metrics in real time. Paddle helps you to identify issues and optimize your SaaS business. It offers many features, including customizable dashboards, detailed reports, A/B testing, and email notifications.
Paddle's detailed reports feature lets you see in-depth information about your SaaS business. For example, you can see how many active users you have, how much revenue you're making, and which channels generate the most sales. This information can help you to make informed decisions about where to focus your efforts to grow your business.
Paddle's A/B testing tool is another excellent feature that can help optimize your SaaS business. This tool allows you to test different versions of your SaaS product to see which one performs better. This can be useful if you're trying to improve your conversion rate or reduce churn.
If you use different payment processing tools for your business, you will not be able to use Paddle or Stripe for SaaS reporting. However, if you decide to go with Paddle, it offers tons of integrations for a better reporting experience, such as, for example, Google Analytics.
Pricing: Paddle is priced at $49 per month, making it a cost-effective option for businesses of all sizes. Paddle provides a 14-day free trial to test the tool before buying.
If you're a SaaS business, tracking key metrics to measure your company's growth and progress is essential. The five best metrics reporting software we've listed can help make tracking these metrics easier for you.
By monitoring revenue metrics (MRR and ARR, CAC, ARPU, churn rate), customer satisfaction metrics (NPS, CSAT, CES), and other essential data sources, you'll be able to make informed decisions about where your business needs improvement.
So get started today by picking the tool that works best for you and start tracking those all-important SaaS sales metrics!
Irina is a Founder at ONSAAS, Growth Lead at Aura, and a SaaS marketing consultant. She helps companies to grow their revenue with SEO and inbound marketing. In her spare time, Irina entertains her cat Persie and collects airline miles.
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