Most businesses have realized that data analysis is the key to making informed decisions and supporting growth. However, it can be challenging for you, especially when you don’t know where to start. The most effective strategy you can adopt regarding this is to focus on key metrics instead of wasting time analyzing irrelevant data.
In this post, we will tell you about the ten best SaaS performance metrics subscription-based companies can track to get useful insights and grow at a rapid pace.
Selecting the Right SaaS Reporting Metrics
Businesses can track numerous metrics. However, not all of them apply to SaaS companies. Even the metrics that are linked with SaaS businesses are overwhelming in numbers. It’s almost impossible for any business or organization to track all these SaaS performance metrics.
Therefore, any SaaS company must select metrics that directly support its objectives. Tracking a lot of metrics will make it hard for you to get useful insights. Instead, you should focus on a few metrics only and analyze them to get actionable insights.
10 Crucial Metrics for SaaS and Subscription-Based Companies
The following are the ten most crucial metrics that every SaaS or subscription business must track.
Trial Conversion Rate
As an owner of a subscription business, you have to offer a free trial to your audience. These free trials help them understand your product or service in a better way and they can opt for paid subscriptions. The number of free trial users that convert into paid subscribers is referred to as the trial conversion rate. Tracking this metric will help you understand the performance of your trials.
If the trial conversion rate is poor, it indicates that customers aren’t satisfied with the performance of your product. Or, they may think the amount you are charging for full subscriptions isn’t justified by the value it adds. Delving deeper into the details of this metric will help you notice these points and you can develop strategies to improve the performance of your product. You can leverage Baremetrics to track and analyze this crucial metric.
New Trial Sign-Ups
The number of free trial sign-ups is a key metric for evaluating how well your trials are performing. A high conversion rate from trials to paid subscriptions is ideal for any subscription business. However, it won’t result in significant growth if not enough people are signing up for the trials.
A low number of new trial sign-ups can signal that you need to focus on your marketing strategies. In simple words, you have to increase your sales efforts and focus on promoting a free trial program.
Number of Active Users
This metric indicates how many users are engaged with your product within a specific period. You can measure it either as daily active users (DAU) or monthly active users (MAU).
Tracking MAU is crucial for understanding the overall condition of your business. A decline in active users is an early warning sign of potential churn. It indicates that users might be losing interest in your platform or facing issues that prevent them from returning. Moreover, the ratio between DAU and MAU provides insights into how often users are coming back regularly.
Churn Rate
It’s one of the most important metrics you need to track to analyze the performance of your product. Churn Rate is the number of users who cancel their subscription in a specific duration. It’s inevitable and each SaaS company has some degree of churn rate. However, a high churn rate indicates that customers are no longer interested in your product. It negatively impacts the revenue, customer lifetime value, and other important metrics.
Monthly Recurring Revenue (MRR)
It represents the consistent, recurring revenue that a SaaS company generates each month. By normalizing revenue into a monthly figure, you can track financial performance more easily.
MRR is one of the most critical metrics for SaaS companies. Fluctuations in this number directly reflect the business’s growth. However, to fully understand the significance of MRR, it’s essential to provide context. For instance, comparing MRR from different periods allows you to gauge growth rate at a high level.
Annual Recurring Revenue (ARR)
It’s just like MRR, but instead of reflecting a monthly amount, it represents the projected revenue for the whole year. This metric is typically based on multi-year contracts. Its calculation can differ across businesses. ARR is valuable for assessing the current health of a subscription-based business and estimating its future profitability.
Customer Acquisition Cost (CAC)
This metric represents the amount you spend on acquiring new customers. Comparing it with customer lifetime value will help you determine how much you should invest in getting new customers.
Customer Lifetime Value (CLTV)
It’s the revenue a SaaS company can generate from a customer throughout the relationship. You have to analyze and track this metric to identify how much a customer spends on your products or services. Make sure CLTV is higher than CAC. A poor CAC-CLTV ratio leaves a negative impact on profitability.
Customer Retention Rate
The customer retention rate represents the percentage of customers who continue paid subscriptions over a specific period. You can consider it as the inverse of churn.
Maintaining a high customer retention rate is vital for the long-term success of a SaaS business, as acquiring new customers costs more than retaining existing ones. Moreover, retaining customers over time enhances their lifetime value.
Cancellation Reasons
It’s not a specific SaaS metric. However, understanding why customers cancel their subscriptions is important for reducing churn. Tracking cancellation reasons helps SaaS companies address issues leading to a high churn rate.
You can use Baremetrics Cancellation Insights to collect valuable customer feedback. It allows you to understand their reasons for leaving. As a result, you can adopt strategies for winning back former customers.
How Baremetrics Can Help
Baremetrics is a reliable tool that can help you track and analyze 26 SaaS metrics, including the aforementioned ones. It has smart dashboards, making it easy for you to analyze metrics that are more relevant to your business.
Sign up for a free trial of Baremetrics today and take your SaaS reporting to the next level.
