The SaaS market has never been more competitive, the digital transformation is exponentially rising and every business is dying to build its unique value proposition. Businesses are facing an enormous amount of data that is lacking their decision-making capabilities. In this article, we are going to talk about B2B SaaS metrics and their help in making data-driven decisions and taking action accordingly. What the hell is a metric Metrics are designed to organize the chaos generated by your data sources and help you see clearly what has been rising or falling in a specific period of time. They help you read, understand and the whole picture. Why leveraging metrics is crucial for SaaS businesses? If your eyes are hearting you every time you look at your data dashboard, then your product will not last long. , and the ability to make data-driven decisions is one of the most impactful factors. and This is where metrics come. The failure rate for startups is shocking Every SaaS startup is unique and different. That said, businesses can’t just define a set of metrics to track and act accordingly. The thing is to define the metrics that best provide you with the numbers that matter. by leveraging metrics you can: set objectives that trigger growth and customer conversion. measure and track overall health and long-term sustainability. align your team with tasks based on the result of the metrics. keep an eye on essential rates like; customer retention, churn rate, acquisition costs, and a lot more. MRR: Monthly recurring revenue MRR is the metric that you can’t avoid looking at, almost every SaaS business uses it to evaluate the overall performance of marketing or sales. why is that? Well, because it is linked to many metrics like churn rate, acquisition cost, lifetime value, etc. -which will be discussed in a bit-. It is simply your growth index since it is a metric that helps you not only to know how much you’ve made in the current month but also to expect the income of the next month Considering those expectations, you can see how sustainable your business is and when to rise or reduce your budget. To calculate it: How to analyze your MRR? customer behavior and demand shift are two factors that heavily affect the MRR. In order to analyze and decide what should be changed or altered, we need to take a look at the types of MRR Types of MRR simply, total new sign-ups or payments that can seem to be an indicator of your conversion rate. New MRR: if we look closer into the expansion MRR rate we can see the which stands for “average revenue per user” and optimizing ARPU contributes to the whole MRR level eventually. You can increase your rate in 3 ways; Upsells, Cross-sells, and Add-ons Expansion MRR: ARPU rate ARPU : A customer upgrades to a more advanced plan to meet his needs Upsells additional feature to enhance the same selected plans, here is an example from Cross-sells: Dropbox add-ons are features or backups that assist your customer while using your products, take here for an example: Add-ons: databox the amount of revenue earned from previous customers who are back in your customer base Reactivation MRR: the amount of revenue lost by customers who gave up your services and now paying for your competitors Churn MRR: CAC: Customer acquisition cost It is a basic logic that a business wants to generate more than it cost to. and that will give the average amount of money spent to add a customer to your customer base. Add up all your marketing and sales expenses, which are mostly salaries and bonuses, and divide them over the number of customers converted in that period of time Optimizing CAC CAC is another growth metric that is crucial in the SaaS landscape and optimizing it is considered to be challenging in the competitive SaaS market. Let’s break down some related insights about it: If the calculated amount of , that means there is something wrong going alongside your campaigns and that’s even dangerous to be overlooked CAC has exceeded the revenue of that single customer But what if it was low, or even too low, that means that you are not leveraging your whole potential and giving up on opportunities. That’s why can help you decide where you should be focusing on. calculating CAC for each marketing channel Let’s say that your , then you should leave the number alone and start to refine your marketing strategy and product improvement by enhancing your customer experience, retention, and support to see where are you doing wrong, which will eventually help you to keep your CAC stable and lower. CAC was getting higher and higher in the last few months Churn rate It is basically the number of your customers that have stopped paying for your services, take the over and multiply the result by 100. To calculate it: number of churned customers the active ones There will always be businesses that struggle to find the perfect fit for them, and your churn rate cannot be zero. However, some of the big boys are managing to have , by generating revenue that covers their loss of the churning customers. s negative churn rate Optimizing churn rate There is no SaaS solution that is perfect for every targeted business around, and businesses always seek the best, but in order the reduce the churn rate as much as possible, there are a few ways: based on false market research, you may find yourself acquiring the wrong personas who will eventually realize that they are in the wrong place and churn up, that's why defining the perfect-fit persona and enhancing funnel is critical to avoid such experiences. Make sure you are in the right place: your marketing instead of brainstorming and thinking of what made them churn, go and speak to them directly, you might find that a bunch of churning customers have a common issue, and solving it could be a life savior for you. Talk to them: Ask your current customer what keeps them with you and what could be improved in order to avoid more loss. Ask the remaining ones: Keep that in mind that the average churn rate for SaaS startups is and if that number went double-digits, then there is something wrong at the root of your product and needs to be fixed before it’s over ideally 5-7%, CRR: Customer retention rate Your customer success manager’s best metric. CRR is basically the percentage of customers retained during a specific period of time. CRR rate is the opposite of the churn rate, lowering the churn rate results in a higher retention rate, and vice versa. take your over the . To calculate it: annual cost of customer success and retention team and initiatives number of active customers Insights about CRR: CRR can express the level of engagement of your customers and how long they plan to do business with you low CRR means a higher churn rate, yes, but it also means that customers are not liking you for some reason, in other words, a low satisfaction level.] A falling retention rate gives an early warning of issues to address as soon as possible. LTV: Lifetime value LTV is a metric that helps you predict the revenue from a customer throughout his entire relationship with your business. please don’t confuse it with . We are talking about the predicted not the already received amount. ARPU For SaaS businesses, the times your . This will give the result that could be used to predict the value of each customer. To calculate it: average subscription length average monthly revenue per customer That said, businesses can't use this metric as a benchmark. Although It’s possible in some industries, SaaS startups, and especially subscription-based ones, use it for other purposes like: LTV is a pain reliever when it comes to segmentation. having an idea about which customers are delivering the higher value, you can refine your customer retention strategy and enhance their experience to eventually reduce the churn rate. Segmentation: Combining LTV and CAC, businesses can predict the duration of their ROI, which is money spent to acquire new customers. That’s why, ideally, . Lower average means that the churn rate is climbing or the CRR rate is falling, while a higher average such as means that you are missing out on business by not leveraging your potential. Tracking LTV alongside CAC: LTV should be three times the CAC ( 3:1) (5:1) It is also beneficial to know where those high-value customers are coming from, by calculating the LTV for each channel, you can start to hang out where your prospects are active. For example, is the go-to platform for of B2B SaaS marketers. LTV for each marketing channel: LinkedIn 76 percent The bottom line When I did my research on B2B SaaS metrics, I came across  headlines that say; The best 15 or even 50 SaaS metrics to track, etc. The problem is, not every SaaS startup has the same objectives and benchmarks to track in this competitive field. Those metrics discussed above are the ones almost the highlighted metrics in the dashboard of many businesses. If you want to see the whole picture of your journey, you need to match the dots. In order to do that, you need to combine metrics together to analyze and go smoothly. And yep… It is hard to do this on your own, you need a software tool because google analytics is not enough Here is a list from Userpilot of the best analytics  tool in 2023 Those are the essential B2B SaaS metrics to raise your decision-making capabilities, and It is not my fault if I didn’t mention an important metric for your product. No one knows your product better than you, and it is your job to complete the puzzle. Cheers.

The is an opinion piece based on the author’s POV and does not necessarily reflect the views of HackerNoon.

The writer is smart, but don't just like, take their word for it. #DoYourOwnResearch before making any investment decisions or decisions regarding your health or security. (Do not regard any of this content as professional investment advice, or health advice)

Metrics that Matter: The Essential 5 Metrics for B2B SaaS Companies

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