On average, between 60% and 73% of an enterprise’s data goes unutilized for analytics. And in today’s data-dominated B2B SaaS market, that can be detrimental to your business. This deluge of underutilized business metrics is often caused by lack of proper data processing and analytics software. However, even with the right technology in place, the sheer complexity of identifying which information is most valuable to your business contributes to the sobering fact that companies are not taking advantage of the insights at their fingertips.
Tracking key business metrics is one thing. Understanding how to optimize and implement that information to achieve heightened business success is another. Let’s talk about what data your SaaS organization should be monitoring most closely, and how you can use it to further your goals.
Stop spinning your wheels on numbers that don’t affect your bottom line.
Data can drive positive business outcomes if you listen closely and use it as a strategic asset. Don’t want to take our word for it? Just look at Netflix.
By analyzing the data insights of their 100 million subscribers, Netflix was able to influence 80% of content viewed. Paying close attention to their key business metrics allowed them to predict customer interests, better tailor streaming suggestions, and increase their viewership, which ultimately led to the $25 billion in revenue they generated in 2020 alone. Not too shabby, huh?
However, Netflix didn’t succeed by tracking random data. They tracked the right data.
Spending your time and effort tracking irrelevant key performance indicators (KPIs) only distracts you from the business metrics that matter. You need actionable insights from the right sets of data to generate actual business value, like increased efficiency or better customer engagement.
We get it. Even if you just choose to focus on “the most important” data, there’s still an excessive amount of insights at your fingertips. According to a 2020 IDC study, the amount of data created over the next three years will be more than the data created over the previous 30. This raw volume speaks to the inherent complexity that comes with understanding which business metrics should be prioritized.
If you’re not sure where to focus your data analytics efforts—or you simply don’t know which business metrics are most closely tied to your company’s bottom line—start by asking yourself what you’re trying to accomplish. Then track only the metrics which most closely align with that goal.
We’ve gathered 10 key business metrics to get you started. Track the ones which most closely align with your goals, or track them all for a 360° view!
10 key business metrics to help your organization…
Keep an eye on growth
It’s difficult to plan for potential business expansion when you don’t have an accurate read on the current trends and daily ebb and flow of your business. Strong (and accurate) data reporting in the following areas helps CEOs and CFOs feel confident in their next move.
1. MRR and ARR
Arguably the cardinal metric for subscription-based revenue, monthly recurring revenue (MRR) is crucial to understanding overall business growth and momentum. Derived by taking the average of how much all of your customers are paying and multiplying it by the total number of active customers that month, MRR allows you to see if your revenue is declining or growing over time, while arming business leaders with the insights they need to make educated business decisions.
Similar to MRR, ARR is the value of recurring revenue of your term subscriptions measured across a one-year period. While MRR helps with shorter-term planning, ARR is critical to helping companies execute their long-term financial projections.
2. Forecasting New Business
In order to increase profits year after year, you have to dissect your legacy financial insights. Forecasting metrics pull together your historical monetary data—including a whole slew of MRR metrics for new and existing business—so you can make improved business decisions based on the entire picture of business success. However, when specifically forecasting specifically for new business, these three metrics are especially important:
- Quota: It all starts with a monetary goal. Without a target quota, how does your team know what number or criteria to work toward and surpass?
- Acquisition: Your attainment rate paints an honest picture of how your company performed in relation to the target revenue and/or sales goals for that period of time—helping you realistically refine your goals.
- Pipeline: You should be giving just as much attention to your potential customers as you do your loyal customer base. Your pipeline needs to be nurtured, followed up with, and handled with close attention to detail. This helps your pipeline convert to actual customers.
Customers are the heartbeat of every company. Nothing is as important as keeping a close eye on the health of your subscribers. Your data reporting tools should give you a real-time view of customer attrition, i.e. subscribers that convert (new business), cancel (churn), and return (reactivate). Not all SaaS churn business metrics are created equally, though. Here’s our recommended handful to keep your eye on:
- Subscriber Churn Rate: The rate at which your customers are canceling their subscriptions. Calculation: Subscriber Churn Count / Start of Period Subscriber Count.
- MRR Churn Rate: The rate at which MRR is lost from churn (canceling or expiring subscriptions). Calculation: Churn MRR / Start of Period MRR.
- Gross MRR Loss: The sum of MRR lost from both churn (canceling or expiring subscriptions) and contraction (downgrades). Calculation: Churn MRR + Contraction MRR.
- Net MRR Churn Rate: The rate at which MRR is lost (or gained) from churn (canceled or expired subscriptions) plus gained from reactivation (cancelled accounts that came back). Calculation: Churn MRR + Reactivation MRR / Start of Period MRR.
Stop revenue leakage.
It’s hard to “show your CFO the money” when the numbers don’t add up—or you don’t even know where the most current numbers are. And spoiler alert: if your financials are represented and tracked in spreadsheets, you’re probably not getting the level of granularity or accuracy in your reporting that you need to adequately plan for tomorrow.
4. Finance Reports
Your financial data should account for every dollar and cent that flows through your organization. It should also eliminate the need for time-intensive, ad hoc reporting to consolidate total revenue, define the subcategories of revenue, and reconcile all transactions at the end of the month. Your finance and accounting team will benefit from having a granular, real-time understanding of:
- Total Revenue: All the subcategories of sales, discounts, and credits/voids that make up total revenue
- Total Billed: Total Revenue plus applicable taxes
- Payments: Understand all payments—collected vs. expected vs. uncollected
- Net Revenue: Total Revenue minus any refunds towards previously received payments
- Outstanding Balances and Dunning: During the collections process, a business will have its personnel or a hired third party contact customers who have fallen behind on paying their bills
Price and package the way your customers want.
User behavior can shed valuable (and profitable) light on your customers’ relationship with your product. Tracking this product interaction and event data within your application or service can identify patterns and actionable insights into your customers’ preferences.
5. Product/Feature Usage Metrics
Capturing information about how your customers are using your product empowers your team to take proactive steps to drive adoption and prevent churn. For example, if a member’s usage rates are soaring, this means they’re deriving a ton of value from your offering. Great job! You’ll likely benefit by reaching out to negotiating an up-sell. However, customers with plummeting usage rates are at a high risk for churn. Catching this early equips your team with the information they need to increase value or rectify problems before losing a customer for good.
6. Customer Activity
Tracking in-depth customer activity helps you understand the different actions your subscribers are taking (and where/when they take them). By analyzing your customers’ innate behavior, you can better allocate resources and tactics to reach your target audiences and ultimately, create more opportunity to increase your subscription revenue. For example, you can build a unique Events-Based Billing pricing model centered on different attributes that are triggered by specific events (i.e. message sent, data stored, ad impression, etc.) to provide true value-based pricing for your B2B SaaS business.
7. Cost per Conversion
Conversions are the cornerstone of your business and can help you understand what makes your customers decide to (or not to) buy your product or subscribe to your service. You should pay close attention to how much time, money, and resources you’re spending on each conversion to make sure you’re keeping the cost as low as possible—while still increasing your conversion rate, of course.
Improve customer experience.
Happy customers are loyal customers. We don’t live in a perfect world, though, and there are going to be situations that lead to a less-than-five-star customer experience. It’s important to address and solve poor customer experiences before they become a bigger (and repeated) occurence for your business.
8. Refunds issued
Any time customers request money or services to be returned is a red flag. Tracking these situations closely to understand why a refund is being requested will help you solve the underlying problems and prevent that negative customer action in the future.
9. Freemium Upgrades and Trial Conversions
Do your customers consistently retain their free membership and seem happy? Or do they cancel their subscription as soon as the free trial period is up? Both are telling business indicators. The rate at which freemium and trialing members convert to a paid membership helps you understand customer satisfaction trends and how invested and fulfilled they need to be to convert.
10. Customer Lifetime Value
The relationship a customer has with your service or product over a certain period of time helps you measure the amount of revenue they bring to your business. This long-term business metric sheds valuable light on the customer journey and how you can convert short-term users into loyal, long-term customers.
Granular transparency produces more insightful metrics.
If you want your data to make the greatest impact, employ an analytics solution with the ability to gather and process granular data. Your software be able to easily process as much data as you can throw at it. It should also provide you with easy ways to filter and adjust the data by relevant segments (region, product, or industry), specific date ranges, and intervals (weekly, monthly, yearly), or whichever criteria is most relevant to your business.
This granular flexibility is the competitive advantage that provides you with the insights you’re looking for at that exact moment you need them. But it’s not something you can achieve if you’re tracking these key business metrics in spreadsheets or across an array of systems.
In just a few weeks, Chargify will be unveiling our latest feature: an advanced data streaming and analytics tool which will empower your organization to transform your untapped data into actionable insights.
- Optimize your data analytics strategy with a self-service analytics suite powerful enough to uncover real-time, customized insights for your enterprise, yet simple enough for everyone to use.
- Analyze your subscription billing data alongside relevant data from across your entire business stack for a single source of truth.
- Build custom dashboards to track the business metrics that matter, so you can make swift, data-backed decisions that tackle your top priorities.
Join our upcoming launch event on May 4th or 5th (depending on your region) to learn how this new tool can help you turn the massive amount of data you’re already collecting into your competitive advantage.
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