In our last blog looking at specific industry sectors we are going to focus on SaaS businesses. For anyone who may not have previously come across this term it applies to a broad range of companies who provide software on a user subscription basis where no additional hardware is required to be installed by the customer. Often the software may have required a large initial investment, in terms of both cash and time, to bring it to market.
Some useful KPIs may include:
One of the most important things for most companies is repeat business. If you can keep your existing customers, and acquire new ones, then you have an efficient recipe for growth.
Churn rate measures how long your average customers stick around.
Revenue Churn Rate
This measures the loss in revenue over a period of time, and will allow you to evaluate the impact that some customers may have over others.
Monthly/Annual Recurring Revenue (MRR)
Monthly recurring revenue is generally easy to measure and equates to the value of revenue received each month from recurring customers. In one metric this can provide insight into various aspects of the business including new sales, renewals and churn.
Committed Monthly Recurring Revenue (CMRR)
This metric is a more refined version of MRR, and shows what the company’s future revenue would be if all sales and marketing efforts were halted.
Cash is obviously important to all businesses. However for SaaS companies this may be particularly relevant because it is likely that the products being marketed will have taken a while to perfect and bring to market.
Customer Acquisition Cost (CAC)
This metric measures the cash that is spent by a business on sales and marketing costs that are incurred over a period of time divided by the number of new customers acquired in that period. This can then also be used to calculate how long it will take the company to recover the initial investment used to obtain the customers.
Lead Velocity Rate
Lead Velocity rate looks at how many potential customers the business is actually working on converting into actual customers. As such it is one of only a few KPIs that are forward looking.
Net Promoter Score
This uses customer feedback to determine how much they value the product, and can be done simply through a feedback survey.
Customer Lifetime Value
Customer Lifetime Value can be complicated to calculate, requiring inputs from average purchase value, average purchase frequency rate and average customer lifespan. However once available this metric may be invaluable in determining whether your customer relationships will be valuable to your business.
What it means for the business
Obviously this is just a brief overview of some of the many KPIs which may be relevant for your SaaS business. Which KPIs you choose to track will depend not only on your specific business but also on where you are in the lifecycle of your business and your specific strategies and goals.
If you think that it could be time for your business to take the next step and develop an easily understandable dashboard to monitor performance Artemis Clarke can help.
Employing the appropriate Finance Director, either on a full time or part time basis, can help identify what really matters to your business, and ensure that this is appropriately measured and monitored.
Artemis Clarke helps rapidly expanding businesses find Finance Professionals and Finance Directors that have the experience to support them. Not just to help them survive, but to help them thrive – and reach the potential they’re aiming for.
Speak to us about how the right Finance Director could help could make a difference to your business. Call 0117 244 1891 today.
Artemis Clarke can help you to source the right Finance Director for your business.