If you want to succeed in the B2B software industry, you need to visualize your SaaS metrics. This is because new features aren't the only thing that matters when developing B2B software. User engagement and performance statistics are also critical to your company's success. You can do so with the help of SaaS metrics visualization.
The vast majority of SaaS metrics are used to assess your company's efficiency. It entails gaining a better understanding of the underlying causes of your product's failure or success. As a result, visualizing SaaS Metrics allows you to better understand and perceive trends in your SaaS business.
What Exactly Is SaaS Metrics Visualization?
Attempting to gather data sets, analyze them and draw insights from your company's churn rate is one example of tracing performance rate. You may also be aware of the difficulty in deciphering data presented in detailed statistics with intertwined columns and rows.
Fortunately, there is a better way to display data that makes it easier to recognize and analyze. And that is visualization. The attempt to visualize a graphical image of gathered information related to one or more SaaS metrics using visual elements is known as SaaS metrics visualization.
Importance Of SaaS Metrics Visualization
Things have changed due to the massive data influx, international remote employees (which are common in SaaS businesses), and a variety of other factors. SaaS Companies are now attempting to design a product that is as simple as possible for their customers.
Apart from its universal perceptibility and simplicity, visualizing assessment metrics in SaaS companies has several other advantages as follows:
- You have access to transparent data.
- You can gain a better understanding of your customers' requirements.
- You can compare the outcomes of various months or years.
- You have a better understanding of what you should do next in multiple scenarios.
What Are The Key SaaS Metrics To Visualize?
Regardless of the type of business you run, expansion is complex. SaaS businesses face the additional challenge of maintaining long-term growth and customer retention. This is because SaaS businesses rely heavily on future revenue.
As a result, SaaS companies must prioritize retention. Traditional business metrics aren't always able to account for the challenges of a business that relies on recurring revenue, and the decisions you make today impact future performance.
Some of the crucial SaaS growth metrics that matter the most for modern businesses are as follows:
- Churn /Churn Rate
The two types of churn to consider are customer churn and revenue churn. Customer churn refers to the number of customers or accounts that leave your service each month as a percentage of your total customer base. The revenue paid by customers leaving your service each month, expressed as a percentage of total revenue, is known as revenue churn.
Most SaaS companies find that measuring revenue churn is more valuable than measuring customer churn because revenue churn is a better indicator of business health.
- Activation Rate
Activation is, without a doubt, the most critical SaaS metric. This is especially true in a product-led growth model, where the in-app user experience becomes a growth driver.
The moment of activation, which the user perceives as an aha moment when they realize the value of your product for themselves, varies from product to product. Discovering which in-product actions correlate to long-term success and retention often requires a combination of user journey mapping, user interviews, and behavioural analytics.
- Customer Acquisition Cost (CAC)
The cost of acquiring a new customer, or CAC, is a measurement of how much you spend on sales, marketing, and other related expenses. You can calculate this by dividing the total amount spent on sales and marketing over a month (including salaries and additional associated costs) by the number of customers acquired.
The cost of acquiring customers is closely related to the lifetime value of each new customer. For a SaaS business to be profitable, you must make more profit from your customers than it costs you to acquire them. In reality, the LTV must be much higher than the CAC for the business to remain profitable over time. A good rule of thumb is that a customer's lifetime value should be at least three times greater than the acquisition cost.
- Monthly Recurring Revenue (MRR) / Annual Recurring Revenue (ARR)
Monthly recurring revenue is a metric that shows how much money your customers bring in each month. The Annual Recurring Revenue, or "run rate," is calculated by multiplying this value by 12 months. While you can calculate your MRR manually, tools like ProfitWell can calculate all of your SaaS metrics in real-time for you.
ARR = 12 x MRR
The SaaS business model is attractive because it generates recurring revenue. Your customers will continue to pay you each month if you continue to provide value through your service.
Unfortunately, many new SaaS companies fall into the trap of undervaluing their services and charging insufficiently to stay afloat. Your SaaS company can become self-sustaining much sooner if you iterate on your pricing strategy until charging enough to allow consistent growth.
- Customer Lifetime Value (CLV Or LTV)
The total revenue generated by a customer over their account's lifetime is referred to as customer lifetime value (CLV or LTV). Customers will have a higher lifetime value if they use your service for a more extended period of time.
Customer lifetime value is one of the most critical SaaS metrics to track. It provides a long-term perspective on customer engagement strategies by allowing you to predict how valuable customers will be to your business over time, regardless of how you calculate it.
In practice, not all customers are created equal. The metrics listed above can help you determine which customer segments are the most profitable and where to focus your resources and marketing messaging.
Understanding your business activity and spotting problematic areas where you need to improve requires visualizing SaaS metrics. It allows you to reach out to customers more effectively and provide them with valuable services that meet their needs.
Techniques for data visualization can help you become more resourceful and up-to-date with what's going on in your company. As a result, you should employ various methods to fully comprehend which SaaS metrics matter the most to your company.