Tracking SaaS Growth: Metrics that matter
Last week we took a look at tuning a SaaS business for growth. That’s a task that cannot be completed effectively without measurement and analytics – in other words, metrics. So this week we are looking at metrics specifically geared toward measuring and helping to optimize the growth stage of a SaaS business.
Flashnode, a SaaS platform that automates interactions between software applications, published a post about the five most important metrics to measure growth that arose from a discussion they had with another SaaS business, Leadfeeder. They realized that they were looking at the same set of metrics to make business decisions, so they wrote a post about them. Their top metric? MRR (monthly recurring revenue) Growth. And the top piece of advice? “choose the ones [metrics] that really matter and every time you make changes, look at the results, analyse and adjust.”
Openview Partners has a lengthy post about the appropriate metrics for different stages of growth. They are mostly looking at growth in what they call the ‘rapid scale’ stage of growth. (For metrics applicable at earlier stages, see our previous post, ‘Lies, Damn lies and SaaS Metrics’). Interestingly, they also highlight MRR as the most important metric at the rapid scale stage.
One popular growth technique, especially for businesses moving into the rapid scale stage, is growth hacking – which essentially means applying a rapidly trying out and testing new marketing and growth techniques and repeating the process continuously to find techniques taht work well as quickly as possible . Growth Media – a growth hacking publication – takes a look at the SaaS metrics most applicable to growth hacking techniques. They don’t really highlight a preferred metric but instead provide a laundry list of metrics for different stages of the customer acquisition process. It’s worth noting that they focus on the subscription model for SaaS businesses.
The Chargebee blog has a great post about using metrics to take your company on a journey. Presumably a journey to success. The post covers a wide range of metrics including some real-world examples from successful companies. One summary quote stood out, highlighting that every company needs to look at the metrics that actually apply to its operations rather than blindly following what others do. “SaaS metrics and their relationships are complicated. They shift and transform, and the laws that bind them change. Some changes can catapult growth and profitability.” And other changes don’t….
Just in case the whole concept of metrics leaves you in hives and you haven’t a clue what people mean by churn, MRR or ARPU, Chart Mogul has a great simple metrics fact sheet in PDF form. And Chaotic Flow has an even more comprehensive one, with some charts to illustrate.
Besides these definitions, Incisive Edge has a straightforward infographic with definitions of more SaaS growth metrics. It’s embedded below.
David Skok’s For Entrepreneurs blog features a great post about second generation SaaS metrics that are useful throughout the SaaS business lifecycle. The post doesn’t just cover useful metrics but why they matter and how to use them with examples of situations where they are helpful and where they are not. One conclusion, common to other articles in this roundup look at SaaS metrics is that, “SaaS businesses are remarkably influenced by a few key numbers. Making small improvements to those numbers can dramatically improve the overall health of the business.”
The SaaS Growth blog, just based off its name, is obviously going to have plenty to say on the topic of metrics for growth. This post is one part of a four part series. This piece lists 12 different metrics useful in the growth stage, and it leads with MRR, like many others here.
One final group of stakeholders that can add a lot of value is the VC community. On one hand they have extensive experience with and visibility into a huge range of businesses, which could be very similar to yours. On the other hand their goals may not be perfectly aligned with yours. Nevertheless it would be smart to look at and take seriously any suggestions they have.
This roundup of advice on SaaS metrics for growth is a great way to get some idea of what other use and what they are thinking but it is important to remember that all businesses are unique and have a unique mix of factors that influence success so think carefully about which pieces of advice to adopt when you build out a growth dashboard for your organization.
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