A business relies on a variety of data to keep it successful and profitable.
Without data and tracking, companies may be missing out on understanding the full picture of their expectations, processes and results.
That is why tracking sales metrics within your SaaS sales platform should be an essential part of your business and marketing strategy.
After all, managing sales metrics leads to a broader reach, greater prosperity and growth, and the quantifiable information to lead to strategic decisions.
Ready to learn which metrics you should be focusing on?
First of all, What is SaaS Sales?
Though it’s an odd-looking acronym, SaaS stands for “software as a service,” and it’s essentially the new normal.
SaaS businesses offer software experiences to users in the form of a subscription model. They are as ubiquitous as they come these days.
Many SaaS businesses are household names.
Spotify, Netflix, Adobe Creative Cloud, MailChimp, DocuSign and many others have changed how we consume information, products and entertainment.
Even how and where we work is affected by a variety of SaaS businesses.
SaaS sales is the growth of these subscription businesses anchored by the acquisition, engagement and retention of customers.
Since there are a variety of metrics for analyzing this focal data, let’s look at the 7 essential SaaS sales metrics to track and measure.
The 7 Most Important SaaS Sales Metrics
Without further ado, here are the SaaS Sales Metrics you should be dedicating your attention to.
1. Monthly Recurring Revenue
Monthly Recurring Revenue (MRR) is the amount of money your business brings in every month.
Think of it as the pulse of your business: it’s the reliable flow of money brought in by customers on a regular basis.
To determine MRR, multiply your total paying customers by the average income per customer account.
MRR is both an indicator and a determinant.
➤ As an indicator, it helps to inform how healthy your business is.
If new customer acquisitions ceased, would your Monthly Recurring Revenue be sufficient to sustain your business?
In other words, MRR is the foundation on which a business can thrive or fail.
A growing MRR indicates customer growth or increased consumer spending, so it is a figure that shows reliability but also illuminates successful customer acquisition, engagement and retention.
Conversely, a falling MRR indicates the loss of customers or their commitment.
➤ As a determinant, MRR informs the company whether or not they can take risks or hire additional team members.
Given that it is a snapshot of the financial consistency of a company, a strong MRR can determine when to spend money to grow the business.
A sub-metric of Monthly Recurring Revenue is New Customer Monthly Recurring Revenue.
This is essentially the growth in MRR from one month to the next caused by new customers.
New Customer MRR is crucial for tracking a business’s growth as it shows how successful a business is in acquiring new paying customers.
2. Customer Acquisition Cost
Customer Acquisition Cost (CAC) is how much the company pays to acquire a new customer.
It’s a metric specific to marketing expenditures, providing data regarding the effectiveness of the business’s marketing efforts.
For a SaaS business to grow, it must bring in more paying customers.
Trimming costs, however, make a company more efficient and helps to increase profit margins. This, in turn, frees up capital to invest and scale.
Analyzing CAC and aiming to bring this figure down motivates the business to focus on their primary candidates for customers, that is, people who are more likely to convert and require less expenditure to do so.
As the business further understands their customer, and marketing efforts become more effectively targeted:
- The Customer Acquisition Cost will go down.
- Paying customers will go up.
- And the business as a whole will grow.
Therefore, CAC is a helpful metric and motivator towards efficiency and growth.
3. Conversion Rate
While Customer Acquisition Cost is a metric focused on marketing, the conversion rate is pertinent to both sales and marketing.
It is the rate at which a sales lead converts into a paying customer.
Analyzing the conversion rate of a business relative to the industry illuminates how effective or ineffective the company’s campaigns are,, and often leads to more questions.
Think of conversion rate as the symptom: it shows that something isn’t quite working, but there are multiple possible reasons as to why.
➤ If the conversion rate is low, it indicates that either the leads brought in by marketing are not high quality or the sales team is not effective in their efforts.
Or, both problems could be present.
Perhaps the sales angle isn’t quite right. Maybe the leads are being culled from too broad of a database. The sales team might need additional training. It could be that the business’s website needs a new, concise design.
No matter the cause, the conversion rate is a tool to tighten up marketing and sales and help their campaigns become more focused.
With better leads and more closing, more revenue and growth will occur.
After pivoting and trying something new, you can review the conversion rate.
➤ If it’s increasing, you’ve identified and cured the unhealthy area and can even double down to see if that will further improve the rate.
On the other hand, if the conversion rate hasn’t improved, you know you still have work to do to find what isn’t quite clicking.
The conversion rate is significant for analyzing a company’s success in sales and marketing and pointing towards more effective campaigns.
4. Lead Velocity Rate
Think of leads as your seeds. Not all leads result in a sale, but without leads, you can’t have any sales.
Therefore, the quantity and quality of leads are critically important to the growth of any SaaS business.
Lead Velocity Rate (LVR) is a measurement of the growth of leads from month to month.
As a SaaS business thrives with its marketing, the LVR will increase. More leads will give the sales team more opportunities for closing deals.
This is something unique to LVR: whereas most metrics are snapshots of past growth, Lead Velocity Rate is a predictor of future growth.
Therefore, Lead Velocity Rate is a helpful tool in forecasting growth, charting out next steps and channeling efforts to generate more leads, more sales and more profits.
5. Customer Lifetime Value
While the previous two metrics have focused primarily on new customers, Customer Lifetime Value (CLTV) puts the emphasis on current customers.
CLTV is the amount of revenue from one subscribing customer.
It takes into account recurring subscription costs and any add-ons, plus it shows how much a single customer generates while using their subscription.
This data informs the business on a key component of revenue and income, but it also stimulates brainstorming on how to increase CLTV.
Acquiring new customers is more challenging than winning over repeat customers or selling additional products to current subscribers.
So, increasing CLTV is a less resistant way to increase revenue.
Additionally, an increasing CLTV translates into a strengthening trust with customers and a more secure foundation on which to grow.
6. Monthly Active Users
This metric is simple.
Monthly Active Users is the number of users engaged with the product during a given month.
This is a prime indicator of a business’s growth, as more users month-over-month show an increase in customers.
It also illuminates engagement.
It’s one thing to have a high subscriber count, but it’s another thing entirely to have customers who use and interact with the product regularly.
The subscriber/engagement mismatch is ubiquitous in social media.
How many times have you seen someone with a large number of “followers” but barely any comments on their posts? This can also be the case with a SaaS company.
Having high engagement is important because it essentially shows the quality of your product.
If customers find it effective and are engaged, they are more likely to renew, purchase add-ons and tell their peers about the product.
In other words, Monthly Active Users is a metric of quantity and quality.
7. Churn Rate
This is perhaps the least “fun” of the metrics but also a possible red flag.
If your churn rate is in bad shape, it’s a wake-up call.
Churn rate is the percentage of customers that cancel or don’t renew during a given time period.
It’s normal to have some cancellations month to month, but something’s wrong if there is a drastic increase.
Churn is invaluable data that shows whether or not the user has a positive experience.
If churn ticks up, there could be a problem with the product or customer service.
Or maybe the marketing efforts haven’t reached the customer to provide sufficient incentive to continue subscribing.
Whatever the case may be, churn rate is a helpful, although slightly stinging, metric to point a business towards finding and fixing a problem.
The Best Software Tools for SaaS Sales
While the aforementioned metrics offer powerful information on your business’s performance, tracking all this data is a whirlwind of a process.
Fortunately, there are software products built to categorize and analyze your data, bringing the metric values front and center so you don’t have to sift through the numbers.
There are many sales management options out there for your needs. Arguably the most successful and well-known is Salesforce.
It is a simple platform that easily unifies team members and collects and compiles data.
With an intuitive design, flexible pricing options and comprehensive offerings — from lead management to sales forecasting to reports and e-mail integration — it’s no wonder Salesforce has been a SaaS software juggernaut.
Another popular sales management software provider is Freshworks, which emphasizes communication by integrating with phone and e-mail.
Some of its focal features are:
- One-click calling.
- Personalized emails.
- Automatic inbox prioritization.
- Email tracking.
HubSpot is a particularly popular option, as it offers many free sales tools for salespersons, in addition to paid plans for businesses.
There are many other robust software options out there, including TradeGecko, Pipedrive, Brightpearl, Sales Cookie and Groove.
Many offer a similar array of features designed to help organize and accelerate your company’s performance, but each has its pros and cons.
Your best bet is perusing a few and seeing which products most effectively address your needs.
Wrap Up: SaaS Sales Metrics are Invaluable Tools
By tracking these SaaS sales metrics, you’ll have the information to assess the health of your company.
You’ll also have insight into overcoming hurdles, pinpointing growth areas and increasing your customer base and revenue.
Before you leave, here’s a tip.
Diego Gomes, CEO of Rock Content, wrote an incredible blog post to explain why your SaaS needs interactive content.
If you never thought about this, now it’s your chance!