If you do not focus on these 25 metrics, you will regret it later.

“What is measured, improves”.- Peter Drucker

“ If you do not collect any metrics, you are flying blind. If you collect too many and focus then you may be obstructing your field of view”.- Scott Mt Graffius

The subscription business is changing the scenario of the software business and the goals of the businesses are to reduce the churn and increase retention. The model of the ‘ sales’ approach is changing from the ‘sales funnel approach’ to ‘growth approach’ ( attract, engage, and delight). In the changed scenario of business, the traditional metrics are no longer relevant for SaaS business and can not capture the key factors that drive the growth of SaaS business.

The metrics to measure the health of the business are also changing. Even though these metrics and quite simple the terms or abbreviations may be confusing. I am listing down the most commonly used SaaS metrics below.

• Conversion- Number of paid customers v/s number of leads.
• Monthly Recurring Revenue or MRR — Monthly revenue realized on an average.
• Annual Contract Value/ ARR — Revenue realized annually.
• New MRR — Revenue added during the previous month.
• Net MRR — Month over month increase or decrease in MRR. ( Net MRR= Existing Monthly Recurring Revenue +New business + Activation of the old account + Expansion MRR- Churn)
• Net MRR Growth Rate — % increase in MRR as compared to the previous month. % Growth Rate = Net MRR for month A — Net MRR of month B )/ Net MRR Month A ) *100
• Expansion MRR — How many subscribers purchased new features.
• Churned MRR — How many, customers canceled the subscription during a month.
• Net MRR Churn Rate — It is also revenue lost a month on month due to cancellation or downgrading ( Opting for fewer features) after factoring revenue from upsell or upgrades.

% Net MRR = (MRR Churn — MRR Expansion)/ Total MRR at the month start *100

• Customer Acquisition Cost ( CAC) — Cost incurred to acquire a new customer.
• Customer Churn- number of customers you are loosing on a defined period.
• Revenue Churn- Revenue you are loosing on a defined period.
• Customer Life Time Value ( CLV). The average amount of money customer pays during the engagement with the company.
• ARPU — Average Revenue Per User. — Average Revenue Earned Per user in a defined period.
• Months to Recover CAC or CAC payback period. — How quickly a customer starts to generate ROI for your business. The number of months it takes to earn back the money invested in acquiring the customer.
• CAC to LTV ratio. — This is a value in a single metric showing the lifetime value of a customer and the total amount of money you spent to acquire the customer.
• Net Promoter Score ( NPS) — Difference between the % of Promoters and % of Detractors. This score shows how happy your customers are and indicators of your business growth.
• Customer Engagement Score — This can be the average amount of time spent by the customer on your platform. This score helps you to find out how engaged the customer is with your platform. This can be the main indicator of churn.
• MQL- Marketing Qualified Lead — Interested Prospect revisiting your website and started interacting with you on various digital channels. He has started watching your Youtube videos or started downloading your ebooks. He is in the ‘ Attract’ stage of the sales life cycle.
• SQL- Sales Qualified Lead- The prospect who has researched enough about your platform and planning to buy the subscription.
• Lead to Customer Ratio — How many leads you are closing as paid customers. The best indicator of how many sales qualified leads you are generating and closing over time.
• Customer Health Score — This is an important index reflects the risk of your business. This is the indicator of predictive increase or decrease in churn. These indicators are different for different industries. The example maybe ‘billing history’ or ‘ features adoption’.
• Lead Velocity Rate — Growth % of qualified leads month on month.

% lead velocity rate = (Qualified Leads in this month- Qualified leads for the last month/ qualified leads for last month )*100

Published By Sateesh Hegde

Originally published at https://www.linkedin.com.