What are the top 10 KPIs for SaaS based companies?

Over two decades of leading SaaS based companies, these are the top 10 KPIs which are crucial in ensuring company performance, growth, agility and identifying vulnerabilities.

The first step in this journey (if you haven’t done that already) is to ask as many questions as possible as it pertains to each business unit such as finance, accounting, sales, marketing, product etc. These questions should have the most business impact where the information provided can make the company more efficient, competitive, profitable, and proactive. In addition to asking questions and identifying the relevant KPIs, do look at the current phase of your SaaS business. If you are a startup, focus on funding, revenue growth, customer satisfaction and product specific KPIs. More seasoned SaaS based companies tend to focus on overall growth, efficiency, revenue per employee etc.

Whoever is tasked to lead this effort in your company should work directly with business unit leaders/teams to come up with these key questions. However, here are some examples I have used over the years. This, by no means, is a complete list but rather what I have used over the years in decision making.

1) Churn Rate:

I find this ratio to be the most critical. SaaS based companies need to be on top of how customers are being retained and how many are leaving within a given period. For example, you can evaluate that when customers leave, was the company able to recover their CAC (customer acquisition cost — we will get into this later). Additionally, if your revenue model is subscription based, then tracking the # of additional subscribers gained or lost within the same customer is crucial.

2) MRR (Monthly Recurring Revenue)

While this metric seems obvious, however it is easy to overlook this key indicator that tracks new sales, upsells, renewals etc. This key metric should be run per customer to analyze the trend on why the revenue is increasing or decreasing for a particular client. This metric can also assist in companies analyzing their contract terms regarding booking long term contracts vs short term.

3) Lead Velocity Rate (LVR)

This rate is crucial in determining the businesses’ ability to grow and assist in establishing future revenue possibilities. Specifically, how many prospects are in your sales pipeline to convert to actual customers. This metric is calculated as a percentage. Most sales metrics look at historical data to make decisions, however this metric does allow for a business to forecast growth (future).

4) Customer Acquisition Cost (CAC)

This metric is common to all businesses and not only SaaS companies. It measures the cash a business must spend to acquire a new customer. It is best to work with your Sales/Marketing heads to determine what costs should be included in calculating this metric. Typically, it involves dividing all marketing expenses, sales costs etc. on acquiring new customers during the sales cycle.

5) Net Burn Rate

This metric shows how much a company spends each month from its capital each month. This considers the monthly recurring revenue + additional revenue subtracts total expenses. For example, if a company is spending 100,000 per month and its total revenue is 80.000, then the net burn rate is 20,000 per month. This metric is key, especially for start-ups who are investing significant amounts of capital in growing their businesses.

6) Viral Growth

I particularly like this metric as it quantifies the growth of new customers from word of mouth from existing customers. This does require a mechanism to track user referrals.

7) Daily Active Users

On a product specific perspective, these are unique users (new and existing) logging into the platform daily. Measuring this trend daily and tracking it over time, say monthly, can be very useful in answering a lot of questions such as which days of the week should infrastructure resources need to be scaled, support hours might need to be extended etc.

8) Number of sessions per user

This again is on a product specific perspective; this tracks how many times the same unique user opened/logged into the app and what actions the user took once logged in. This valuable data can help in many ways for Product owners to understand which features/pages are being visited the most, what is typically the entry point and exit point of the user, which pages the user spends the most time on. Based upon this user behavior, A/B testing can be performed, product roadmaps can be better aligned, and engineering resources can be better focused.

9) NPS (Net Promoter Score)

This score basically looks at the number of existing customers who are likely to recommend the product VS those who are neutral VS those who hate it. Typically, a score between 1–6 (hate/will not recommend), 7–8 (neutral) and 9–10 (Recommend). There are professionals in the field that can further provide a detailed analysis on when these surveys should be run, how often, what type of questions should be asked, how the feedback should be managed etc. The bottom line is that one can start slow with a very targeted group of customers and evolve your process accordingly.

10) Recurring VS Non-Recurring Ratio

As evaluations for SaaS based companies tend to be based upon recurring revenue, it is important to understand this ratio as a startup starts generating revenue. Typically, during the early stages of the startup, the ratio tends to be equal as professional services do play a key component. However, over time this ratio, in an ideal situation, should be around 80:20, where 80% of your revenue is recurring. Overtime, this ratio will tell the story of the journey a startup is taking, and several conclusions can be made on how the startup is performing.

While this by no means is a complete list of KPIs to track, it is a great starting point and will provide invaluable information on how the company is performing. Most importantly, these KPIs can identify areas which might require immediate attention and create a roadmap of continuous tracking, comparing, prioritizing, and making decisions accordingly.

Related posts:

Kami adalah produsen atau pengrajin kursi lesehan terpercaya dan terbaik di Indonesia, dengan brand bernama BangKELES. Sudah ribuan lebih customer merasakan manfaat kursi lesehan BangKELES yang…

Being an argumentative sort of person, every once in a while* I find myself getting into a spot of witty repartee. It usually happens on twitter, the land of the 140-character…

MORE POSITIVE... Stay away from negative conversations and from negative people. You don't want their thoughts and words to sink into your subconscious mind….