The Road To Success: Metrics Used By Top Performing SaaS Companies

Measuring success seems simple, until you get into the nitty gritty of key performance indicators (KPIs), metrics, costs, and lifetime value. For veterans and newcomers alike, what to track and how to track certain metrics can be confusing. However, by following the paths laid out by successful businesses, we’re able to ascertain what should be tracked and how to gauge true success. Scaling a business is hard, but it’s not impossible.

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The fastest growing businesses have one thing in common: they continue to monitor what’s working for them, what’s not and what’s causing them to trail behind their rivals.

Below are key metrics to monitor:

Monthly Unique Visitors

A monthly unique visitor refers to someone who visits a company’s website at least once within any given month. Software used to track website traffic can differentiate between a visitor who arrives at the site once and a unique visitor who returns to the site often. This metric is a strong reflection of the company's audience, its size, and the potential impact of marketing efforts. Engagement metrics that track average pages visited, repeat visits, and average time spent on the site are also an excellent indicator of the quality of a site's traffic. Most companies utilize Google Analytics to measure unique visitors as it's free.

Conversion Rate of Signups

While most SaaS companies offer a free trial or self-service options, some require prospective clients to speak with sales before using the software. Ultimately, self-service is the best way to lower the costs of customer acquisition, which makes signups an important metric. Signups can be increased with educational guides and simple content that effectively convert free trial users into a paying customer. Tools like Google Analytics, Adobe Analytics, HubSpot, or Mixpanel can measure this effectively.

Product-Qualified Leads (PQLs)

PQLs are the number of free-trial users who have reached a certain point in the decision stage where they have engaged in meaningful activity on the free-trial and achieved a desired output from the product. This metric is used to determine those with free trials that are highly likely to become paying customers. You can track this using an automated marketing tool like HubSpot or Databox.

Qualified Lead Velocity Rate (LVR)

Lead Velocity Rate is a real-time indicator of a business’ lead growth, measured each month. It is also a great indicator of future sales attainment. To work out what this is, a simple equation can be used:

[ (Qualified Leads in Current Month - Qualified Leads in Previous Month) / Qualified Leads in Previous Month ] x 100

Organic vs. Paid Traffic ROI

This tracks how many visitors are arriving from non-paid or organic listings in search results or those that have arrived to the company’s site from paid searches, like pay-per-click advertisements. Paid searches are best for immediate results, while organic growth will garner results over time. Utilizing both paid and organic methods is ideal but that advice comes with a caveat: use marketing dollars efficiently.

Viral Coefficient

The digital era has given a new meaning to 15 minutes of fame. Virality may be short lived, but its impact is incomparable. The greater your viral coefficient, the faster your company will grow. To measure virality, calculate your viral coefficient. The formula is as follows:

Viral Coefficient = invites x conversion percent

Conversion Rate to Customer

The conversion rate is a benchmark for how good of a job the business is doing at turning leads into customers. By increasing the conversion rate to customer, the company is also directly increasing its revenue.

Average Revenue Per Account (ARPA)

Average revenue per account (ARPA), also referred to as average revenue per user/unit (ARPU), measures the revenue generated per account. This is often done monthly as many businesses operate on monthly subscriptions, but can also be done yearly or quarterly. This metric can be used to gauge differences in activity and engagement across new and existing customers.

Customer Acquisition Cost (CAC)

Customer acquisition cost (CAC) is referred to as a metric that can make or break a business. This is calculated by determining the cost invested into marketing and sales when acquiring a new customer. Ultimately, the lower these costs are the more profitable the business is.

To calculate CAC, a company will need to aggregate all of its costs from applications like QuickBooks or by manually tracking in a spreadsheet.

Monthly Recurring Revenue (MRR)

Monthly revenue is a consistent number that a business will likely track no matter how many pricing plans and billing cycles it has. SaaS companies should calculate multiple MRR numbers, depending on the complexity of their businesses.

If one measures a higher churn MRR than its new MRR, it’s likely that the company is losing as many customers as it’s gaining each month. This isn’t a good sign. However, when a company’s add-on MRR is higher than its churn MRR, that means that the business has figured out how to have positive retention. Stripe can simplify the process of tracking MRR with the free Stripe MRR and Churn dashboard.