When you’re investigating financial KPIs and metrics these days, there’s a good chance you will run into the term SaaS finance metrics. However, you might not know if you need to know more or even if these apply to your business. Let’s take a closer look.
What Is SaaS?
The first thing we should cover before you commit to reading any further is what SaaS actually is. This acronym stands for Software as a Service. In other words, it’s companies that sell subscription-based access to a variety of online tools or platforms.
If you’re not in that business (and not planning to get into it), then you probably don’t need to read any more about this! We do have several articles about other business metrics and KPIs, though, so be sure to check those out!
What Are SaaS Finance Metrics?
Being in a business that usually doesn’t have a storefront or any in-person contact with customers makes it tricky to figure out how your business is doing. But that’s the reality of the new breed of online business services and platforms.
SaaS finance metrics and SaaS performance metrics are a way for companies who don’t meet their customers face to face to measure their performance, track growth, and identify problem areas that they need to address.
What SaaS Finance Metrics Should You Track?
Now that we’ve covered the basics about what SaaS business model metrics are, it’s time to look at the most important SaaS metrics you should be tracking.
One of the best SaaS growth metrics you can track is recurring revenue. This is usually divided into MRR, or monthly retained revenue, and NRR, or Net Retained Revenue. These SaaS key metrics measure how many customers you have retained, as well as how much they are spending per month, on average.
In order to ensure the growth of y our SaaS platform, you want to ensure that you retain customers at their original package price or that they upgrade. So when these SaaS finance metrics fall below 1, you know there’s a problem with retaining existing customers.
LTV, or Customer Life Time Value
The next thing you want to track as part of your SaaS performance metrics is LTV, or customer lifetime value. This is a metric that measures how much each customer spends on your service or platform for the full duration of their subscription.
Since we all know that customer acquisition costs a lot more than customer retention, the longer you can retain customers and the more they spend on your service, the better the ROI per customer is.
CAC or Customer Acquisition Cost
CAC or customer acquisition cost is another important SaaS performance metrics that you need to measure as part of your SaaS growth metrics.
This particular metric measures how much it costs to convert one customer. This means tracking your spending on marketing and sales over a period of time, and how many customers you acquire, as well as how much you spend per customer from first contact to signing up for your service.
Average Revenue Per User
Another one of the most important SaaS metrics is the average revenue per user or ARPU. How much money are you making from every customer you acquire? This is especially important early in the process of launching a SaaS startup when everything you are doing is based on hypotheses and assumptions.
While you might not be making enough revenue per month yet, simply because you don’t have enough customers, once you know your ARPU, you can work out exactly how many customers you need to break even and to make a profit.
And Many More
There are countless other SaaS finance metrics you should be measuring, including CAC payback period, churn rate, burn rate, gross margin, demo bookings and more. The exact metrics you need to track to stay on top of growth and identify potential problems will depend on exactly what your business model and plan look like.
Usually, if you have an accountant or CFO on board, they will be able to advise you of the best KPIs to measure for maximum effect.
Why Measure SaaS Finance Metrics?
The next thing you might be wondering is whether it’s worth the time and effort to track SaaS revenue metrics and even SaaS growth metrics. After all, if you have more money in the bank every month, you’re doing okay, right?
However, SaaS finance metrics can tell you so much more than your bank balance.
SaaS performance metrics can help you to identify areas that your team might need to increase productivity or whether you’re spending too much to acquire customers in relation to the amount they are spending. It can help you to determine how many customers you need to sign up per month to meet your growth targets and when you will start becoming profitable.
Most SaaS companies will attempt to access investment funding at some point too, and when they do, SaaS finance metrics will be the heart of their pitch and business plan.
Investors will want to know what you have done so far and what you predict will happen over the next six months to a year. Basing this on actual growth and revenue figures makes your pitch that much more credible and your business that much more of a viable investment.
Do You Need to Pivot?
Many SaaS platforms start with an idea, refine it and stick with it. However, many don’t. There are countless stories of companies that have started as one thing and ended up being something completely different.
SaaS finance metrics not only tell you if you are meeting your growth goals, but they can also tell you if it’s time to look for the next opportunity. If you find that your metrics are relatively flat no matter what you try to change, that’s a clear sign that it might be your idea that needs work. Instead of pursuing something that probably won’t work, this allows your team to rethink, regroup and relaunch.
Simplify SaaS Finance Metrics Tracking
The biggest problem many start-ups face when it comes to SaaS product metrics and SaaS revenue metrics is finding the time to track them.
When you’re running a start-up, everyone on your team probably wears many hats, and there’s hardly enough time in the day to get everything done.
Creating custom SaaS finance metrics reports is time-consuming, especially if you have to manually export, organize, and format accounting and other data to create those reports.
That’s why we created the LiveFlow platform. LiveFlow integrates directly with your accounting software and allows you to map key data to cells in a Google Sheets report. Once mapped, a live link is created, so when your accounting figures are updated, so are your reports. No hands-on data handling is required!
If you’re looking for easy and affordable ways to integrate and automate your SaaS finance metrics efficiently, LiveFlow might be the solution you’re looking for. Contact our team to find out more or to book a live demo so you can see it in action yourself.