As a company with multiple offices and with customers and shareholders around the world, at ClicData we find that monitoring our business performance online using live financial KPIs on informative dashboards is an absolute must. It is also a clear and attractive way to showcase our product to our key players.
Here is a list of our go-to KPIs. While some of what’s listed here can be considered specific to SaaS companies, we also include several metrics that can be very valuable for financial tracking, regardless of your business model.
17 Financial KPIs For SaaS Businesses
- Revenue by month
- Revenue budget completion
- Expenses by month
- Cashflow balance
- Monthly recurring revenue (MRR)
- Annual recurring revenue (ARR)
- Average revenue per account (ARPA)
- Number of reactivations
- Number of expansions
- Number of contractions
- New business
- Customer churn rate
- MRR retention rate
- Customer retention rate
We have several reports we’ve tailored to the specific needs of certain audiences, both in the KPIs we’ve selected to use in the dashboard and in the level of detail that it provides.
For example, our Management Report will provide more detail than our Overview that is published for the shareholders. Further, when a relevant event on the dashboard happens, the Management Report will also trigger certain alerts to key people in the organization so they can direct their teams to adjust their action plans accordingly.
Monthly Management Report
Here are key metrics that we include in our Monthly Management Report and that are valuable to businesses of all kinds:
#1 Revenue by Month
Each month, we look at revenue per product and compare the actual revenue—from our invoicing system—with the budgeted revenue from an Excel spreadsheet. As we prepare the report every month, we include a gap analysis to detail the possible differences between the actuals and the budget data.
#2 Revenue Budget Completion
We total up the monthly revenue and compare that with the yearly budget. This gives us an idea of the amount of business that’s needed to meet our objectives for that year.
#3 Expenses by Month
We look into each month’s actual spending and compare it to what was planned in the budget. We include the ability to drill down so that if the total expense actuals exceed the total budget, we can look more closely at which expense categories went overboard.
Then it’s helpful to generate analysis to explain potential gaps and highlight other factors, such as changes in payment schedules or unplanned supplier contracting.
#4 Cashflow Balance
The cashflow balance reveals the difference between cash in and cash out and tracks cash consumption over time. It also provides a consolidated view of the available cash across all bank accounts.
As with the previous metrics, the cashflow balance usually includes a comparison between the budget numbers and the actuals, so you can make adjustments as the year progresses.
Financial KPIs for Tracking Performance of SaaS Businesses
Here are several powerful KPIs geared towards audiences both inside and outside a SaaS business.
1. SaaS metrics related to revenue
In addition to the KPIs listed above, the following metrics provide a macro snapshot of a SaaS business’ financial performance. Shareholders and investors pay particular attention to these indicators:
#5 Monthly Recurring Revenue (MRR)
The specificity of the SaaS business model calls for a significant investment upstream for marketing the product. Since payments typically occur each month, it will take some time for the business to recoup its initial contribution.
In fact, it is essential that a SaaS business amass a significant number of subscriptions early on as they will allow it to achieve positive cashflow before your funds run out.
The MRR is the key indicator that will allow you to monitor the progress of your business for this reason. It represents the amount of income you hope to capitalize on each month. You can make a rough estimate:
MRR = Number of customers × Average amount of a subscription
For example, if you have 10 customers and the price of a subscription is €90, then 10 × 90 = an MRR of €900 per month.
For a more detailed view, it will be necessary to dive into the customer database so that the calculation takes into account the subscriptions taken out, options, packages, and so forth.
Armed with that data, you can determine if the resulting MRR corresponds to your initial objectives or if, in fact, you need to readjust your strategy.
#6 Annual Recurring Revenue (ARR)
ARR = MRR x 12.
#7 Average Revenue Per Account (ARPA)
Whether you refer to them as accounts, users, or clients, this is:
ARPA = MRR ÷ the number of accounts or users or clients.
2. SaaS metrics that are linked to the MRR
Sub-indicators of the MRR can get you important information about your business’ revenue stream. By analyzing them on a monthly basis, you can compare their performance per month and recognize trends that occur over time.
#8 Number of Reactivations
This lets you track the number of customers who were active in the past and are reverting to a paid plan.
#9 Number of Expansions
These are the increases in income for existing customers, usually through upgrading to higher plans or more expensive offers.
#10 Number of Contractions
Sometimes, customers switch their subscriptions to lower, cheaper plans. These are the opposite of Expansions.
#11 New Business
This is the amount that new customers spend on a paid plan.
This is a SaaS indicator to measure the loss of active customers. It can be done by volume or by value.
We like to calculate a monthly rate by value—MRR gained minus MRR lost—for a given month and then compare that number to the total MRR.
3. SaaS indicators related to Customer Success
While these indicators aren’t always used initially, they can be very instrumental in developing a successful business.
The KPIs below can allow you to analyze whether your customers are getting results using your service or product. They might be created by the CFO but are usually destined for the Sales team:
#13 Customer Churn Rate
Measures the percentage of unsubscribed customers over a defined period. It is calculated as follows:
Customer Churn Rate = Customers unsubscribed over the period / Number of customers at the start of the period
#14 MRR Retention Rate
Measures what percentage of your MRR is renewing each month.
#15 Customer Retention Rate (CRR)
Measures what percentage of your customers renew their subscription.
The CRR provides a good indication of the quality of your product and how well you are engaging your customers overtime via marketing events and/or sales follow-ups.
4. SaaS indicators of growth and expansion
These indicators are particularly relevant for outsiders, such as future investors or buyers. Efficient growth is the result of a balance between acquisition costs and a customer’s lifetime value, as well as the implementation of SaaS growth strategies.
- Customer acquisition cost (CAC)
- Customer lifetime value (CLTV)
#16 Customer Acquisition Cost (CAC)
This is the SaaS KPI to follow if you want to determine the profitability of your investments.
For example, it would be an essential part of assessing the effectiveness of a marketing campaign. It is calculated as follows:
CAC = Sum of marketing and sales expenses over a given period / Number of clients obtained during that period.
As we’ve discussed in previous articles, when it comes to marketing strategy, the best methodology for inbound marketing is the one that produces the most results. It is used in the steps you take to attract visitors, convert them into prospects, transform them into customers and, finally, integrate them by making them promoters of your brand.
Each of these steps requires investment, and that’s where CAC comes in. It will allow you to calculate the cost of acquiring the customer at each stage of the marketing process and ultimately to determine whether the revenue brought you was, in fact, more than what it cost you to acquire that customer.
Many SaaS companies that invest in marketing campaigns through trade shows, brochures, emailing, and so forth) find it difficult to follow the traceability of sales. That’s where marketing KPIs and dashboards can help.
#17 Customer Lifetime Value (CLTV)
Also known as Lifetime Value (LTV), CLTV is the strategic extension of the CAC.
The SaaS CAC reveals whether the acquisition of clients in a certain time period actually favored the accumulation of profits. CLTV is a SaaS metric that estimates accumulated profits over the lifetime of a customer.
Since growing a SaaS software company involves significant upstream costs, even before its marketing is underway, it’s not uncommon for the number of subscriptions to be insufficient In the first few months and for the company to be in a negative cashflow state. How can you tell if the company is doomed to fail? By looking at the CLTV.
Here is the rule: If your CLTV is equal to or greater than three times your CAC, then the current investments will produce positive results in the long term. If, on the other hand, it is close to or lower than the CAC, it is because your strategy is deficient, and it must be reviewed in order for you to succeed.
Communication Above All
Whether you’re a SaaS business or expert in another industry, whether your financial KPIs’ audience is internal or external, efficient design and supporting communication will always go a long way! As discussed in this article, it is critical that you define financial KPIs which are relevant to the management of your business and track your success and failures. These KPIs should be tailored to your audience and consistent with your objectives.
Communicating them to your teams and stakeholders with the right dashboard will support greatly the quality of your monitoring. It will reveal clearly the good news and bad news and thereby empower your audience to react faster. You can build your financial dashboards with ClicData and get more insights that will help you steer your company more efficiently.