As a SaaS startup, it's important to know which metrics to track to ensure that your business is on the path to success. In this article, we'll discuss the top 5 essential metrics that you should be tracking to unlock the secrets to success.
Monthly Recurring Revenue (MRR)
MRR is the predictable, recurring revenue generated by subscriptions. It's crucial to track this metric to understand your business's revenue growth and stability. MRR provides insight into the current health of your business and helps you plan for future growth.
- Calculation: MRR = Total Revenue from Subscriptions in a given month
- Example: If a SaaS startup has 100 subscribers paying $10/month, the MRR for that month would be $1,000.
Customer Acquisition Cost (CAC)
CAC is the cost of acquiring a new customer. It's important to track this metric to ensure that your customer acquisition efforts are cost-effective. You want to acquire new customers at a reasonable cost to ensure that your business is profitable.
- Calculation: CAC = Total Cost of Sales and Marketing / Number of New Customers Acquired
- Example: If a SaaS startup spends $10,000 on sales and marketing in a month and acquires 100 new customers, the CAC for that month would be $100.
Customer Lifetime Value (CLTV)
CLTV is the potential revenue expected from a customer throughout their engagement with your company. It's important to track this metric to ensure that your business is focusing on the right customers. By understanding your CLTV, you can tailor your marketing and sales efforts to focus on high-value customers.
- Calculation: CLTV = Average Monthly Revenue per Customer * Gross Margin % / Churn Rate %
- Example: If a SaaS startup has an average monthly revenue per customer of $100, a gross margin of 80%, and a churn rate of 5%, the CLTV would be $16,000.
Churn rate is the rate at which customers stop using your product over a given time period. It's important to track this metric to understand your customer retention rate. High churn rates can be detrimental to your business's growth and profitability.
- Calculation: Churn Rate = Number of Customers Lost in a given month / Total Number of Customers at the beginning of the month
- Example: If a SaaS startup had 1,000 customers at the beginning of the month and lost 50 customers during the month, the churn rate for that month would be 5%.
Net Promoter Score (NPS)
NPS is a metric to measure customer satisfaction and loyalty based on the likelihood of recommending the product to others. It's important to track this metric to understand your customers' perception of your product. A high NPS score indicates that your customers are satisfied and loyal to your product.
- Calculation: NPS = % of Promoters - % of Detractors
- Example: If a SaaS startup has 60% promoters, 20% passives, and 20% detractors, the NPS would be 40.
By tracking these 5 essential metrics, you can ensure that your SaaS startup is on the right track to success. By understanding your MRR, CAC, CLTV, churn rate, and NPS, you can make informed decisions that will help your business grow and thrive.