It’s no secret that tracking key metrics is essential for any business, but when it comes to SaaS companies, the stakes are even higher. Why? Because subscription-based businesses are more complex, the success or failure of a month can hinge on whether or not certain metrics are in line.
As a SaaS company, it’s important to keep track of various metrics to gauge the health and growth of your business. Here are ten key metrics that every SaaS company should track:
Monthly active users
There are a lot of talks these days about monthly active users or MAUs. If you’re not familiar with the term, it’s basically a measure of how many people are using a particular product or service on a regular basis. UI/UX design agencies are always looking for ways to increase their MAUs because that’s generally seen as a good sign that they’re doing something right.
Of course, there’s more to it than just raw numbers. You also need to take into account things like engagement and retention rates. But at the end of the day, UI/UX agencies are in the business of designing great user experiences that people will want to come back to again and again. And the best way to measure that is by looking at monthly active users.
Churn rate
UI/UX design agencies need to be able to differentiate themselves from the competition to win new clients and get hired by SaaS companies. One way they can do this is by having a low churn rate. The churn rate is the percentage of clients that an agency loses in a given period of time. A low churn rate indicates that an agency is able to keep its clients happy and retain their business. UI/UX design agencies with a low churn rate are more likely to be successful in the long run, as they will have a steadier stream of clients and revenue. For many businesses, churn rate is an important metric to track, as it can indicate whether or not customers are satisfied with the product or service. UI/UX design is a complex field, and agencies that can reduce the churn rate often have a competitive advantage.
Customer lifetime value
In simple terms, customer lifetime value, or CLV, is the amount of money a customer is worth throughout their relationship with a company. This can be calculated by multiplying the average customer lifetime by the average customer revenue.
There are a number of factors that go into calculating CLV, such as customer acquisition costs, churn rate, and customer retention. By understanding CLV, SaaS companies can make better decisions about where to allocate their resources. For example, if a company has a high CLV, it might be worth investing more in customer acquisition. Conversely, if a company has a low CLV, it might be necessary to focus on retention to increase revenue.
Customer acquisition costs
Customer acquisition costs, or CAC, are the amount of money it costs to acquire a new customer. This can be calculated by dividing the total marketing and sales costs by the number of new customers.
Gross margin
Gross margin is the percentage of revenue that’s left over after subtracting the cost of goods sold. For example, if a company has a gross margin of 50%, that means that for every $1 in revenue, the company has 50 cents left over after paying for the cost of goods sold.
Net promoter score
Net promoter score, or NPS, measures customer loyalty and is calculated by asking your customer base whether they will be willing to give a recommendation for your product or service on a scale of 0 to 10. Customers who respond with a 9 or 10 are considered promoters, while those who respond with a 0 to 6 are considered detractors. The NPS metric is calculated by subtracting the number of detractors from the number of promoters.
Net promoter score
When SaaS companies hire a UI/UX design agency, it is important to track how their business is doing by measuring how much their revenue has grown over a certain period of time. It can be calculated by subtracting the current revenue from the revenue from the previous period and then dividing it by the revenue from the previous period. The received result then can be multiplied by 100 to get a percentage. For example, if a company’s revenue grew by 20% last year, that means its revenue growth rate is 20%. If your agency’s revenue was $100k last year, and this period of the same length is $150k, then your revenue growth rate is 0.5 or 50%.
There are a number of factors that UI/UX companies can optimize to affect the revenue growth rate, such as the size of the market, the company’s pricing strategy, and the effectiveness of their sales and marketing efforts. By tracking this metric, SaaS companies can make sure that they are on track to meet their growth goals.
Operating expenses as a percentage of revenue
This metric measures how much of the company’s revenue is being spent on operating expenses. Operating expenses include things like salaries, rent, and utilities.
Cash burn rate
Cash burn rate is a metric that SaaS companies should track in order to determine how efficiently they are using their resources. It can be calculated by dividing the total amount of cash spent in a given period by the number of days in that period. For example, if a company spends $100,000 in a month and has 30 days in that month, their cash burn rate would be $3,333.
Runway (months of cash remaining)
SaaS companies should track their cash burn rate to get an idea of how long they will be able to sustain their current operations. The runway is the amount of time that a company has to achieve profitability before it runs out of cash. It can be calculated by dividing the total amount of cash on hand by the cash burn rate.
Conclusion
SaaS companies should track a variety of different metrics so that they can measure their business performance. By tracking retention, customer acquisition costs, gross margin, net promoter score, and revenue growth rate, SaaS companies can get a good idea of how they are doing and what areas need improvement. Hiring a UI/UX design agency can help optimize a number of factors to affect revenue growth rates, such as the size of the market, the company’s pricing strategy, and the effectiveness of its sales and marketing efforts.
