The SaaS sector is expanding at an alarming rate. It currently accounts for more than 145.5 billion US Dollars of global revenue. The market value will surpass 170 billion US Dollars in the coming years. This is a highly lucrative industry that is also highly competitive for established and new businesses.
Whatever your industry, regardless of where you are from, you know that SaaS requires you to continuously monitor and respond to relevant data. Why? To maintain your competitive edge and to keep the innovation process moving ahead.
It is important to remember that the industry’s growth rate means that consumers’ demands are constantly changing. SaaS startups must continuously optimize their processes and improve them to offer valuable products to the market. You need to measure and track the key performance indicators in order to do this.
Let’s look at the top SaaS KPIs that you should monitor and take action on in 2022.
- Monthly recurring revenue
Your monthly recurring revenues is one of the most important and essential KPIs that you should track. This is an easy way to track your new sales, cross-sells, renewals, and your monthly churn. You will need reliable billing software to help you manage your expenses, automate invoices and, most importantly, generate meaningful reports.
A robust billing system with an integrated analytics tool allows you to easily track this important metric. Monitoring your MRR will help you stay calm, in control of your cash flow, and ensure your business is on the right path. It is also an important metric to allocate resources, especially in the SaaS world where innovation is essential.
SaaS businesses with legacy systems will feel the most pressure to modernize. You can only modernize your software if you have control over your monthly cash flow. You can avoid financial pitfalls by ensuring that your cash flow is steady on a monthly basis.
- Churn Rate
SaaS companies use a subscription-based pricing model today. This is the best way for you to monetize products and create cross-sell opportunities. Subscriptions can also be the most effective way to maximize the lifetime value of customers, so it is important to keep them loyal for as long as you can.
However, users will eventually stop using your software. This is known as user churn. You should monitor your churn rate to determine the best SaaS tools that will help you increase efficiency and customer retention.
The churn ratio is a simple, but powerful KPI that allows you to see how many users are being lost in a given time frame. Divide the number users who have left the site at the end each month by the number you had at the beginning of the month to calculate the churn rate. To calculate your churn percentage, multiply this number by 100.
- Revenue Churn
So you know that there is a certain percentage of people who have stopped using your software after a month. Do you know the revenue loss that these customers have caused? Are you aware of how much money these people take with them when they move?
This is a crucial KPI, as it tells you how much money to allocate to other departments or campaigns. These include content marketing, sales content management, product innovation and new sales tools.
You should use the right data integration tools to combine all data from different departments in order to calculate your revenue churn. It is often difficult to figure out how much you are making when customers have different prices and subscription plans. The formula below will allow you to calculate your revenue churn rate.
- Annual recurring revenue
It’s just as important to keep track of your monthly revenue rate. You should also have an annual view of your revenue. This KPI is just as important as the MRR. It expands your view and allows you to plan strategically, forecast effectively, and innovate more efficiently.
It is important to monitor your annual revenue in order to optimize your sales funnel. This will also help you create content that converts.
An OKR can be viewed as a key result versus a KPI. An OKR is a framework for setting goals that helps you strategize better and establish clear objectives with quantifiable key results.
This is an important metric in any case. You can easily calculate it simply by multiplying your MRR with 12. It’s simple, yet effective for SaaS companies that plan ahead.
- Monthly Recurring Committed Revenue
The CMMR is another interesting SaaS growth and sales metric. The CMMR is a measure of what you can expect to make in sales and marketing if everything stops.
This is not something you would allow to happen. However, it can provide a useful indicator of how much effort you must put into your SDR process each month in order to maintain your current revenue stream. This also gives you an indication of what to expect in terms churn over that time period.
Because it considers the expected churn rate, the CMMR key performance indicator can be valuable for your SaaS team. This allows you to plan for cancellations, downgrades, and upgrades. It also gives you a better overview of your monthly financial standing.
Your CMMR can be calculated by adding new users to your MRR. This will reduce the expected churn rate.
- Cost of Customer Acquisition
Although it is an obvious and simple KPI, it is one that every SaaS company should be tracking. Monitoring the cost of acquiring customers is essential for financial forecasting and financial management. However, it can also have an impact on other business processes, like your B2B marketing strategy.
Your sales professionals will be able to monitor your CAC to improve their ability to gauge the quality and efficiency of leads. This will allow them to assign leads to specific needs and personalize the sales process to minimize time and financial waste. As you may have guessed, this will reduce the sales cycle and allow you to convert more customers for less.
Calculate your CAC by adding the number of new clients to your marketing and sales costs.
You must monitor your cash reserve over the long-term as it is a key KPI. It will determine the success or failure of your SaaS company before it goes broke even. SaaS companies depend on cash reserves for their products and content marketing strategies to convert and retain customers.
SaaS sales can only be maximized if there is an outstanding product and a great marketing strategy. But the product will not produce a positive long-term ROI. You must have a reserve of cash to cover unexpected expenses.
There is no magic formula, just keep an eye on your cash reserves and carefully allocate your resources – there’s no need to eat away at your fund without good reason.
- Customer Lifetime Value
CLV is a popular KPI in any industry. It is because it maximizes the lifetime value of customers is the best way for you to increase revenue and move your SaaS business forward. This requires not only an incredible product but also a great content strategy and a CRM that is focused on nurturing and delivering value every customer.
Although it’s not an easy road, the rewards are well worth the effort. Focusing on increasing the customer’s lifetime worth is one of the most valuable sales tips that any sales professional can offer. Because repeat business is always more expensive than acquiring new clients, it is actually a better sales tip.
Divide your annual revenue by the total number of yearly signups (paid). Divide your total yearly signing-ups (paid) by the number unique customers and multiply these numbers. This is your projected CLV.
- Lead Velocity Rate
The lead velocity rate is a measure of how fast you are growing your leads each month. Your ability to generate qualified leads will determine how quickly you can grow. The lead velocity rate shows how efficient your sales pipeline and whether you are converting and generating leads quickly enough.
Your LVR can be improved by improving your sales process, lead generation strategies, or outsourcing sales. This is an excellent way to increase your inbound and outsidebound strategies. Before you can do this, however, you must first determine your lead velocity rate.
Add the qualified leads you have in your last month to subtract the qualified leads in this month. Divide that number by last month’s qualified leads and multiply it by 100 to calculate your LVR percentage.
- Net Promoter
Although it may not directly relate to sales or finances this KPI is essential for support, sales and marketing teams. This is essential for the overall growth of your SaaS company. It will assist with everything, from improving your website copy to refining and optimizing your sales processes and tactics.
It is simple to calculate the net promoter score. The insights you get from your customers will help you create a result-driven SEO strategy by 2022, improve your support process, optimize and market your software faster, and make it more profitable. Monitoring your NPS can help you gain a lot of insight. Make sure to ask your customers via social media and on your website what their opinions are about your product.
SaaS companies must monitor key performance indicators (KPIs) to keep their edge in the highly competitive SaaS market. You won’t be able optimize your products continuously and set achievable goals that will bring you revenue and loyal brand fans.
These KPIs should be a part your 2022 growth strategy. You will have no problems taking your SaaS company forward.
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