What Are The Top Five Principles For SaaS Analytics?
Entrepreneurs need to understand the acronym-filled world of SaaS metrics. These SaaS metrics are essential because they help companies establish steady growth. Because SaaS companies provide access to their software via a subscription-based model, customer retention and achieving scale are goals. Therefore, several agencies like GetUpLead can help SaaS companies acquire and convert more clients.
Furthermore, SaaS analytics is essential because it helps companies understand metrics to measure, measure them, and use the information to improve their business. Hence, this article discusses principles of SaaS analytics that can help improve your business. Kindly read on for more details.
5 Fundamental Principles of SaaS Analytics
#1 – There Is No Standard
There are no standards for the SaaS metrics you should track or how to track or calculate them, unlike when you track your basic financials. There is no central authoritative body that issues guidelines for monitoring and analyzing SaaS data.
#2 – You Make The Rules
As earlier mentioned, there are no rules, guidelines, or standards regarding tracking and analyzing SaaS data for a subscription-based business. Therefore, you need to create your rules. You need to decide the metrics that need tracking, how you’ll track them, and the type of analysis you have to perform. You are responsible for not just creating these rules; documenting the specifics of what you’re tracking is also essential.
Documenting what you’re including and not including in your analysis is necessary. It is also important to note how your calculations go. Furthermore, you’re responsible for justifying why you’re tracking the metrics and the reason for making your choices during your analysis.
Carrying out these responsibilities gives you clarity, helping you keep your data consistent every month and also helping you see vital trends. Furthermore, communicating your metrics with people outside your company will be easy.
#3 – When Speaking With Capital Markets, You Have To Use Subscription Metrics
As far back as ten years ago, few venture capitalists were concerned about subscription metrics, and recently, it’s no longer valid. When your company speaks with a VC, they expect you to be fluent in your subscription metrics, and the metrics hugely impact how VCs value your company.
Apart from VCs, entrepreneur-friendly lenders also expect you to know your subscription metrics fluently. These lenders decide if they should lend to a SaaS startup and how much they should lend depending on your company’s key metrics like monthly recurring revenue (MRR).
Other people interested in your metrics are those looking to acquire your company. Therefore, data trends and measurements like MRR and customer lifetime value (CLTV) help interested parties determine your company’s long-term financial prospects.
#4 – Analyzing By Segment
You may not consider analyzing your company by segment if your company has a single product that it sells at the same price to all customers. Nevertheless, it would be best if you did so. A product has several segments you can analyze. If you sell your product at the same price, you can still segment it by geographic location, customer type or size, or the sales rep that made the deal.
Segmentation is essential in helping you clarify areas where you should focus more effort and areas where you should deemphasize or improve.
#5 – Understanding Your Business Model
Some key metrics subscription-based companies should track include MRR, customer acquisition cost (CAC), customer lifetime value (CLTV), and churn. Although tracking these metrics is important, your business model determines how you track and calculate the metrics. Also, there are other metrics you have to track because of your business model.
When tracking and analyzing them based on your business model, the metrics you choose should give you the information you should act upon. Understanding these metrics helps you accurately answer questions like whether your business growth and development are going the way you planned or if the business model is viable. You should also know what is working and what needs an overhaul.
Analyzing your subscription metrics while keeping a keen eye on your business model and objectives helps you get information to make the best choices regarding your company’s future.
Several SaaS agencies provide financial tools that can help manage SaaS, software, and subscription and recurring revenue businesses. Furthermore, they offer customers that want to remove risk and inefficiency from their financial operations with renewal management, invoice automation, revenue recognition, and subscription analysis. These agencies also help customers increase their business’ actual valuations.
More on SaaS Metrics
Because investors look at essential metrics before funding tech companies, you may want a comprehensive list of such metrics. When tracking and assessing your technology business’s health, several metrics, numbers, and statistics are used for the calculation.
Core metrics used to measure a SaaS company’s success include customer lifetime value, customer retention rate, cost, and churn rate. Also, net promoter score, repeat purchase rate, customer effort score, and customer satisfaction score are other metrics used to measure the success of a SaaS company.
The metrics mentioned earlier have their calculations, and there are reasons why each is important to investors. These metrics help you make data-driven decisions that help your company attain your desired level of success.
Wrapping Things Up
Although SaaS metrics are essential for your business, there are no rules on tracking or calculating them. You are responsible for creating your rules, documenting them, and justifying why you’re tracking such metrics. Furthermore, SaaS analytics is data-driven, helping you make informed decisions.