Around here, we talk about metrics quite a lot, and I’m sure you can imagine why. I mean, metrics are the core data that indicate the state of your business financially and process-wise. Without these metrics, you can’t possibly know how successful or unsuccessful your business and product are, nor can you possibly calculate solutions, diagnose the problem, nor forecast future conditions. SaaS metrics, of course, are important for these reasons as are any other metrics.
But, what are the most important SaaS metrics? Well, let me put a little disclaimer here that, it depends on context, which ones are the most important in any given situation. So, when I try to tell you which ones are the most important, and I try to be more general (since potential situations are impossibly numerous), it’s a little difficult.
Nonetheless, all in all, I’d say these are probably the most telling metrics, at least.
#1 – Churn
Churn, churn, churn … in SaaS it’s all half the community ever wants to talk about, and everyone’s tired of hearing it. But, that’s not a criticism of its heavy presence in discussion, because no matter how tired you may be of hearing about it, or how tired I may be of writing about it, it is a significant problem.
Churn, of course, is basically a rate of attrition. I don’t entirely understand how it came to be called “churn”. Over time, established loyal customers can disappear for various reasons. Some just can’t afford the service anymore (and aside from cutting into your revenue, there’s nothing to do about those), some are dissatisfied and have moved to competitors, while others just no longer feel a need for the service as a whole.
These are indicators of problems, all but one being addressable.
#2 – MMR (Monthly Recurring Revenue)
No, I don’t know why there’s an extra M in the abbreviation, either. Nobody seems to. Anyhow, MMR is important for fairly obvious reasons.
It comes in a couple flavors, one being recurring revenue per customer, the other being total recurring revenue (before churn and new customers are factored in), which can give you a moderately optimistic steady projection of your financial future.
This is a good calculation of where you stand unless churn is exceptionally bad that month, before any new acquisitions are known. Basically, a “well, at least we can probably rely on this” sort of thing.
#3 – CAC (Customer Acquisition Costs)
Your customer acquisition cost is fairly obvious too. This entails all of the expenses of sales, marketing and other related costs that are brought on during the first half of a customer experience, for a new customer.
Knowing how much it costs to acquire a customer (along with other metrics like lifetime values of customers) gives you a good view of if your marketing budget is being well-spent.
If the cost of customer acquisition isn’t significantly lower than the recurring revenue of a customer unit, or the lifetime value and lifetime expectancy of a customer, then you’re really not gaining much headway, and must either take slightly negative measures to make the revenue higher (higher prices directly, or passing on overhead costs), or you need to find a less costly marketing strategy.
These SaaS metrics, again, are absolutely not the only important ones, especially when you get into real scenarios with context and relevance. But, as I said before, these are the most telling of general states of things.