As a fast-growing software company, one of the most important things that has benefited us since the outset is having our metrics and KPIs monitored constantly, including on a very large office screen visible to all our visitors.
MRR growth
Naturally this is the most important metric, so I will include it even though it's a no-brainer if you work in SaaS. At Leadfeeder, we use Google Sheets, Supermetrics reporting and Metabase to automate these reports. This gives our team and our investors real-time information on how things are going and it is transparent for everyone.
When looking at MRR growth, it's not just the amount of new revenue that we're interested in, but also growth percentage per month, new purchases per month, etc. When you try new strategies in sales or marketing they should be measurable and the MRR growth metric is probably the best overall metric for that.
Automated MRR growth reporting to Google sheets is quick and transparent
Gross & Net Churn
Churn rate quickly tells your startup how happy your customers are and how well your product is working for them. Churn can be calculated with the churn rate of the customer base or revenue churn rate.
There are a couple of different ways to calculate revenue churn, so it is important that we understand the difference between gross and net revenue churn.
Even though your net churn might be low or even negative, there is still room for improvement because gross churn can be a more accurate measurement of how your SaaS tool and customer success team is working. These two can be calculated in the following ways:
These two churn metrics are sometimes mixed and on their own they don’t provide accurate enough data. For example, net churn (the red line) can also be negative if your expansion MRR (upselling revenue) exceeds the cancellations, but this is not possible when calculating gross churn. Therefore, it is essential to measure these both to get a better idea of your churning customers.
Lead Velocity Rate
These previous metrics are the foundation of data-driven growth but we need metrics for predicting future business growth and sales efficiency too. We use Lead Velocity Rate as one of them.
This metric calculates how the amount of signups is growing month-to-month or compared to a previous best month:
As said, you can either use a month-to-month calculation to establish lead velocity or compare new signups to a previous best month. On slower months in July and December signups naturally decline because of holidays, but lead velocity rate is a pretty good indicator of how your digital marketing efforts and website is working overall. Because this metric tells how our business is developing signup-wise it can help predict future sales growth because we know the conversion rate from a trial to a paid customer.
No-touch Conversion % and Training Conversion %
No-touch conversion % shows how well the product sells itself with the help of automated onboarding. It’s also about the experience of new users. This “no-touch” term means that we don’t have personal training or other personal connections with the user, but rather they follow our automated onboarding.
It can be calculated by observing a sample of sign-ups over a specific time period and seeing how many of them purchase.
Automated onboarding works in many cases, but there are also some users who require more help from us and that’s where training conversion % comes in. We wanted to test if we can increase the conversion from trial to premium by offering new users a free and personal 30-minute training during the trial period. This has been working really well and we’ve seen a significant increase in the conversion rate among those who take a training session compared to those who don’t. Therefore, training conversion % has become one of the key metrics within our sales team’s KPIs. This calculation is also very straightforward to make as it can be calculated like this:
Utilisation rate
Utilisation rate helps to understand how active your users are and if there might be inactivity and risk for churn.
Conclusion
I want to highlight the importance of choosing the correct metrics for your SaaS business. It doesn’t really make sense to focus on too many of these on a daily level. Instead, pick and choose the ones that really matter and every time you make changes, look at the results, analyse and adjust. The foundation of growth for SaaS companies is increasing retention and doing more sales, so the metrics are not too complicated. But knowing how to improve these metrics is another thing entirely. Crystal clear sales and business development KPI metrics enable you to test new ideas and get feedback quickly with help from the numbers.
About Leadfeeder:Leadfeeder is a lead generation and web analytics startup based in Helsinki, Finland. Their goal is to make sales and marketing more intelligent by utilizing web analytics. Leadfeeder uses Google Analytics API to identify the companies that visit your website and tells you exactly what they are searching for. With integrations to CRM systems and MailChimp, you can build a complete marketing automation tool stack around Leadfeeder.
