Why are these metrics important?
Why put the time and effort into constantly staying updated on them?
These numbers are more than just small data points. They’re crucial for evaluating performance, driving strategic decision-making, and forecasting future growth and profitability in SaaS businesses. Without this type of insight, there’s no way to know if your startup is growing, struggling, moving at the same pace as the competition, or lagging behind.
Some SaaS metrics are highly valuable in helping to predict revenue and growth accurately. That includes Monthly Recurring Revenue (MRR), Annual Recurring Revenue (ARR), and Customer Lifetime Value (LTV). When you know how to analyze the health of your subscription business using these metrics, you can set realistic goals and benchmarks for your company. (Example: do you need to hire rapidly to meet increasing demand or scale back to keep more money in your pocket?)
Other metrics, including Customer Acquisition Cost (CAC) and operating expenses, provide you with very specific insight into what you’re spending right now. This can help you to create a budget and then make budgeting decisions over time, ensuring you’re getting the return on investment your company needs.
Churn metrics are another valuable component to look at because they help you monitor customer retention and loyalty. Without insight into churn rates, it is hard to develop a strategy to keep more of your customers happy for a longer period of time. This could include improving marketing strategy or developing new marketing campaigns to target a different customer set.
There are other metrics that can specifically help improve efficiencies within your company. That includes metrics related to operational costs and profitability. With this information, you can see areas of opportunity so you can create better efficiencies within your company.
At the same time, your company must remain competitive. Some key metrics can offer insight into that. For example, by looking at your SaaS finance costs, revenue, and customer value, you can make better pricing decisions. That can help you to determine where your financial health is right now and assist in valuation, but it also helps ensure that your long-term financial health remains solid based on competitiveness.