Joel York has compiled the most important SAAS metrics on one sheet of paper (if you print double-sided). Joel also really nicely points to his prior posts that explain the metrics in more detail.
If you run an SAAS company, download the PDF, laminate it, hand it to your team, and begin calculating your own metrics.
But, if you stop there you are not adding any value to your company!
Once you have a pretty good idea of your metrics, try to determine the metrics that, if improved, will add the most value to your company. Additionally, determine how you can improve them. By identifying solutions to improve the metrics that will add the most value, you can also identify some really good business growth strategies.
For example, you might find your churn is high (a.k.a., customer renewal low, customer attrition is high). What are some possible issues? Off the top of my head:
- You may be selling to a poor customer segment. Determine if customers exist with characteristics that have high churn or low churn. Next, look for marketing channels and messages that will help you attract more low churning customers. If all your customers have high churn, identify other segments you can target that have lower churn (a more difficult problem to solve, but it is probably solvable).
- You may be overselling your customers by making promises you cannot keep during the sales cycle. Calling on a few non-renewing customers can help you identify if this is an issue. It is relatively easy to adjust your sales messages to tone down the promises.
- You may not be properly onboarding your customers. Many early SAAS companies focus on acquiring signed customers, yet they fail to properly onboard them. Again, you can narrow this issue with a few calls to customers that haven’t renewed and you can also call some more recent customers that should be onboarded and find out how they are doing (or check their usage records and find out how often they are using your product). You may need to implement a “customer success” unit to ensure customers are properly onboarded.
- You may not be setting up for the renewal well enough in advance of the renewal date. Your best competitors know the renewal date of your customers so they will attempt to “knock you out” and move their product in. If your team isn’t preparing for customer renewal, you may lose the acquisition due to a competitor. Call the customer periodically well before the renewal to ask how they are doing. Show them you care and are proactively addressing their issues. This simple phone call does not require a lot of resources, and it could help to reduce your churn. (Note, for lower price point products, you might try this via e-mail).
- Your product may not work very well in practice. Many opportunities exist to improve the usability and features of your product. Again, your customers will tell you the issues if you call out to them. You can also check usage records and do some usability testing to improve the usage and value from their perspective.
You can also implement a customer survey (Net Promoter Score or another approach) to receive feedback from your customers so you can identify your areas of needed improvement and the customer segments that seem most satisfied. This should help you determine your next course of action.
Note: The list is not meant to be exhaustive, but rather to portray how you can use your SAAS metrics to identify relatively specific actions you can execute to improve the target metrics. This approach works with all metrics in every type of company. The trick is to retrieve your metrics, identify the ones needing adjustment, and then drill down to the most important issues/opportunities and start working on them.
Improving your company utilizing this vector will also benefit you by naturally helping with creating competitive advantage and identifying business growth strategies. This dynamic represents one of my favorite company development strategies because it helps you to focus on the few things that matter.
So, you have your SAAS metrics on one sheet of paper– What are you going to do about it?