What is one SaaS metric every software founder should know?
To help software founders identify important SaaS metrics, we asked software startup founders and tech CEOs this question for their best recommendations. From the potential effects of inflation or recession to customer lifetime value, there are several metrics that may be critical for every software founder to successfully run their SaaS startup.
Here are eight SaaS metrics every software founder should know:
- Potential Effects of Inflation or Recession
- Identify Your Best Clients With DAU/MAU
- Months to Recover the Cost of Acquiring a Customer
- How Many Users are Leaving Your Platform and Why
- Qualified Marketing Traffic
- Revenue Per Traffic Source
- Net Promoter Score
- Customer Lifetime Value
Potential Effects of Inflation or Recession
Most existing SaaS business models were built during Economic Expansion intended to serve a specific targeted customer persona. History proves that seismic economic or social changes create an equally seismic shift in customer priorities. In other words, your existing customers “go away” with little warning (ask Peloton and DoorDash).
If a SaaS is going to survive, let alone thrive during inflationary and recessionary periods, attention needs to be paid to ensuring that the business model and underlying technology is quickly re-worked to build in the flexibility to immediately “chase” your existing customers to ensure that the value you deliver more than satisfies the fears, concerns, financial cut-backs and other major shifts in customer priorities.
This will require astute situational awareness and anticipation of how a persistent down economy will impact your customer, and a SaaS solution re-designed to support a fluidic business and financial model.
Andy Gibbs, Fidotek Corp
Identify Your Best Clients With DAU and MAU
In addition to the obvious metrics, especially for subscription-based SaaS companies, DAU/MAU is impactful if used well. Tracking daily active users (DAU) or monthly active users (MAU) creates an insightful picture of the active users and a great profile about your best type of clients or customers. From these metrics, you can dig deeper and track how your customers use your product, like what are the most used features. This will give you a reliable forecast on the retention rate you can expect from your current client base and highlight the red spots that need addressing.
Cristina Imre, Quantum Wins
Months to Recover the Cost of Acquiring a Customer
SaaS by nature is a subscription business. That means the cost is upfront but the revenue comes in installments. With this one metric you know how to keep track of the two most important growth levers, beyond keeping a healthy pipeline:
1) How you can play with pricing, cost, and existing runway to optimize what suits you best.
2) How to keep churn in check by knowing the exact number of months below which there is no hope to become profitable or even sustainable.
Maddy A, Startup to Scaleup
How Many Users are Leaving Your Platform and Why
It’s important to know how you acquire customers, what the cost is, and how they interact with your platform but the #1 metric all SaaS founders need to keep track of is churn. Knowing how many users are leaving your platform and why helps to refine your product, enhance your user experience, and ultimately convert short-term customers into legacy ones.
Jered Martin, OnePitch
Qualified Marketing Traffic
Qualified marketing traffic is the number of people who visit your website or landing page and take the desired action, such as subscribing to your email list or signing up for a free trial. This metric is important because it allows you to track the effectiveness of your marketing campaigns and see which ones are driving the most qualified leads. It also helps you to identify any bottlenecks in your funnel so that you can make changes to improve your conversion rate.
Iryna Kutnyak, Quoleady
Revenue Per Traffic Source
The most common SaaS metrics that people look at are MRR, ROAS, or churn rate. Those are very high-level metrics and don’t necessarily look into the concrete touch-points of purchasing behavior. In my experience leading the SaaS marketing teams, we often tried to improve the number of traffic sources from different places over the internet (review portals, magazines, well-ranked blog posts, etc.). This led to different traffic streams from which we tried to get meaningful ROI and scale upon those where it was possible.
Matej Kukucka, Marketing Player
Net Promoter Score
Net Promoter Score (NPS) is an important SaaS metric because it gives you a sense of how your customers feel about your product over time. Are they likely to recommend your product as a solution to a friend or business partner? Are they dissatisfied and would actively detract from your software? Knowing your NPS over time allows you to identify changes in the software or your service that have improved or harmed customer sentiment.
Logan Mallory, Motivosity
Customer Lifetime Value
Customer lifetime value is a great SaaS metric with which to measure your startup. For example, this metric will tell you how much you’re spending on a new customer, and weigh that number against how much profit you’ve gained out of that particular customer. On average, you want the latter number to be at least three times the former number. If you’ve reached that across-the-board goal, you’ll know you’ve got a strong customer lifetime value and your marketing strategies are doing something right.
Matt Woods, SOLD.com