Growth Metrics for SaaS Companies

Core Technology

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25 Jan 2022
5 Min read

Most Important Growth Metrics for SaaS Companies

Regardless of industry, the importance of growth metrics cannot be underestimated. Without them, your company will be in danger of stagnating and failing. In addition to revenue, sales growth metrics also provide a better understanding of your customer base. In this log, let us look at some of the most important SaaS growth metrics that boost sales and increase the final output. 

– Monthly Revenue: 

One of the most common growth metrics for SaaS companies is monthly revenue. However, monthly revenue is not the best indicator of a company’s health. If your customers only use your service for a few months, tracking your churn rate, also known as customer attrition, is advisable. Increasing churn rates is a sign of a company’s success and signals that you should increase your revenue model.

– Monthly Recurring Revenue: 

Monthly recurring revenue, or ARR, shows the growth rate of a SaaS company over time. A rising revenue trend indicates that the company is sustainable and profitable. Early-stage startups tend to increase, with an average ARR of 144%. Typically, these growth rates will slow down and fall in the 15% to 45% range over a year. To understand how to calculate the trend for an early-stage SaaS business, calculate its 12- to 18-month revenue growth rate.

MRR, or Monthly Recurring Revenue, is one of the essential startup metrics for SaaS companies. MRR helps determine how quickly a company will grow and is a crucial metric for measuring a company’s success. It can also help predict revenue in the future. For example, if you have a thousand customers each paying $100 per month, you’d have a million monthly MRR. MRR growth rate is the percentage change from month to month. A 10% MRR MoM growth rate is a worthy goal for a SaaS company.

MRR is the most important metric for SaaS companies. It helps the company understand how it is growing and predict future revenue. Besides a monthly growth rate, MRR is a crucial metric for a SaaS company to monitor. If it is low, it means the company is losing money. Moreover, a high CAC can lead to rapid failure. Ultimately, MRR is one of the essential metrics for SaaS startups.

– Active Users: 

Another critical SaaS metric is active users. Active users are the ones who use your software. As a SaaS company, it’s not about the number of customers but the number of active users. These users will help you gauge your growth rate, gross margins, and product/market fit. Although churn rates vary from company to company, they should all be below 5%.

– Cost Per Acquisition:

The CAC, or Cost per Acquisition, is a crucial metric for any SaaS company. It helps you determine how much you need to spend to reach a customer’s goals. For example, CAC is calculated as the number of people you must get to make a sale. This figure is used to estimate how much you should be paying in terms of marketing and sales. This metric is also used to help you determine how much money you need to invest in your product. If you want to know more about growth metrics for SaaS companies, then visit www.onpassive.com

A monthly CAC is an important metric for SaaS companies. This metric calculates how much a user is willing to pay for a particular subscription. It is also a key metric for companies that offer a subscription-based service. But, it is also important to monitor customer satisfaction. If the CAC is high, the company has poor customer service. If it is high, it is not profitable. Instead, it is just a waste of time. 

Conclusion:

In addition to revenue, sales growth metrics also provide a better understanding of your customer base. If you want to know more about growth metrics and their importance and application for your business, log on to Onpassive today. 

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