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5 underrated SaaS metrics you probably should be tracking
October 12, 2022
Software-as-a-service has quickly become one of the most popular subscription services and products on the market. These ‘SaaS’ tools are designed to make the working professional’s life easier and improve workplace productivity.
Whether it’s a suite of email marketing tools or accounting software to help track revenue trends, every month: these tools are a necessity.
Businesses in this digital age are on the hunt for innovative solutions that can help improve their workday efficiency.
That’s why SaaS products of every kind are in high demand.
Selling subscription software is now a fairly standardized business category with established metrics. If you’re a SaaS company looking for ways to sustain your growth: You’ll need to track the right SaaS metrics.
SaaS metrics are benchmarks businesses use to find growth opportunities. They allow you to gauge how successful they are as a business, tackle challenges head-on, and find a way to take your business model to the next level.
You probably follow the same KPIs everyone tells you to track. However, we’re here to show you a few underutilized and underrated metrics you need to know.
Let’s dive in:
Certain underrated SaaS metrics can help you dive deeper into your company’s story
You’re most likely keeping a close eye on popular key performance indicators like revenue growth, profit margin, or client retention rate. While these advanced metrics are still important to track, they don’t necessarily capture the whole picture.
Tracking SaaS metrics is about finding new opportunities to grow and expand your business. They help you find your pain points and provide the direction you need to progress. To understand the bigger picture, you’ll need to look at everything from workplace efficiency to SEO strategies.
Here are five underrated metrics you may not currently be looking at.
SEO: Non-branded search metrics
As a brand, you’ll want to have a pulse on what exactly is bringing traffic back to your website. You can do this with branded and non-branded search metrics.
Branded search metrics are ones where a visitor searches for your brand directly in the search bar. These individuals know what they’re looking for and are ready to start shopping with your brand.
However, non-branded search metrics are where there’s more opportunity for growth. These metrics are ones where individuals use more generic keywords and search terms to find products that your brand offers. These terms are what we call uncategorized topics.
Most brands are quick to take a deep dive into the branded search metrics and put the unbranded on the back burner. That’s why this is such an underrated metric, especially for SaaS companies. These are the keywords that are turning prospects into paying customers. They provide insight into what the customer is looking for that leads them to your brand.
Using these metrics can help businesses capitalize on organic search result growth and make fruitful changes to their SEO strategies.
This is particularly important for larger companies since branded keywords aren’t necessarily a result of your SEO strategy.
Engagement: User-to-session ratio
Your user-to-session ratio is the number of sessions you have per user. This SaaS metric is important because it shows how many of your customers are enjoying your service and are actively using it. If your user-to-session ratio is low, these individual customers may not come back to renew when their contract is up.
As you may know, a returning customer is more beneficial than a one-time customer. They provide more value and are proof of customer loyalty and a high-quality product or service. Instead of trying to increase your sessions by bringing in new business, consider trying to increase your sessions per user. When you focus on gaining worthwhile returns by improving the customer experience, you can increase the value of the individual customer and ensure you always have a healthy stream of income coming in.
This SaaS metric will show you how good your company is at retaining customers and building credibility. It will show you compelling insight into just how valuable your product is in your consumer’s everyday life. Are they always logged into your software? Do they only use it once a week or once a month? What can you do as a company to become more integrated into their work week?
If you aren’t keeping an eye on your user-to-session ratio, it could lead to an uptick in churn later down the line.
A/R: MRR collection rate
MRR stands for monthly recurring revenue. This is an essential metric for subscription services because it provides the predictable total revenue your business generates from current active subscriptions in a particular month.
Your MRR collection rate refers to how much of your monthly recurring revenue you’re actually collecting. Just because a customer signs a contract and agrees to pay you, doesn’t mean they will. If you aren’t chasing invoices and always staying on top of monthly payments, you could be making a costly mistake. Companies with a high collection rate always have a positive cash flow. This provides peace of mind and healthy savings, which is what investors look at if you’re trying to get funding.
Your business should always aim to have a 100% collection rate. If not higher. Some believe that most companies only collect 60-70% of their MRR. This means your monthly profits aren’t adding up.
We’ll break it down:
Let’s say your business is bringing in $25,000 in Monthly Recurring Revenue. However, all of your monthly expenditures cost you $30,000. With a 60% MRR recovery rate, your burn rate would be around $10,000 per month.
If you ignore that other 40% of collections, you might run out of cash. Your savings won’t last as long as you think they would, and you’re looking at having problems with profit. However, with a 100% MRR collection rate, you wouldn’t have anything to worry about.
Keeping an eye on this metric is essential to your success and growth. If you aren’t constantly looking for ways to improve your collection rate, you could be in a world of trouble later down the line.
Growth: Net new MRR
Since most software as a service is sold as a subscription, net new MRR is integral to understanding your overall performance. As you know, your monthly recurring revenue changes every month. This is because while new revenue is gained, old revenue is lost from churn. Your net new MRR will provide an overview of your growth and help you find new ways to minimize churn rates and push upgrades.
The formula for net new MRR is simple. It’s (new customers) x (MRR / new customer).
For example, if you brought in 10 new customers paying $1,000 a month, your net new MRR would be $10,000. This metric is used to determine future growth.
Tracking net new MRR helps you understand what proportion of your revenue is new customers versus status quo MRR from existing customers.
As we all know, sales and marketing initiatives fluctuate every month. However, if you set a net new MRR goal every month, you’ll have a baseline you can use to track progress by month. This will provide insight into just how quickly your brand is growing. If your net new MRR is slowly decreasing every month, you can readjust your plans and find new opportunities before it’s too late.
Team: Workforce efficiency
To stay competitive, you’ll need to track your workforce efficiency. Workforce efficiency looks at your productivity levels and employee performance. This SaaS metric looks at all the metrics necessary to understand the effectiveness of your employees.
Here’s how you can measure employee productivity.
Let’s say your business generates $100,000 per month while utilizing 1,500 labor hours. To calculate your employee productivity, you would divide 100,000 by 1,500. This means that your company generates $66.6 per hour of work. If this number isn’t what you want it to be, you can look for opportunities to cut costs or find new opportunities to grow your revenue.
Even while keeping your eye on underrated metrics, you can’t control everything. Many outside factors can play a role in workforce efficiency.
Sell Products The Easy Way
At Lemon Squeezy, we want to help you see results. Our solution can help you sell everything from software to subscriptions with confidence. If you’re ready to get more from your SaaS products and start tracking these underrated metrics, you’ve come to the right place.
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