It is a well-understood fact nowadays that conventional business indicators do not fetch all the main factors that resonate SaaS platform’s profitability to their complete extent.
Therefore, let us today discuss the top SaaS metrics for sales and how you can track them if you are using a SaaS CRM application for your business.
What is SaaS?
SaaS or ‘Software as a Service’ is a business delivery model for providing a license for using a centrally hosted software on a subscription basis, like cloud based CRM software, whereby the users of the software can access the service via API or a browser.
In the SaaS applications, the support of the solution falls completely under the vendor’s responsibility.
In other words, the SaaS model helps users to work with a ready-to-use online software solution after paying a subscription fee.
Why do you need to understand SaaS sales metrics?
The need for understanding sales metrics of SaaS solutions is because it can help you to find the problems that you should focus on in order to find rapid business growth.
Therefore here are six most popular metrics on our list that will help you understand how your business is doing and what you should concentrate your efforts on to determine how profitable your business is:
1. LVR (Lead Velocity Rate)
LVR is the lead growth rate of qualified leads per month. The benefit of using this indicator is that it provides a clear understanding of your businesses’ future revenue and growth. This metric is more necessary to understand than knowing your businesses’ revenue growth rate per quarter or month.
For example, if you set a goal to increase LVR by 25% you will also be able to equally increase the revenue generated for your business.
The math for calculating LVR is as follows for finding the growth rate for new leads per month:
(Leads qualified this month – Leads qualified last month) / (Leads qualified last month)*100
2. Conversion Rate
The term ‘conversion’ refers to any target action that a user of your SaaS solution has to take, which may include anything for establishing contact with a potential user to making them pay the subscription fee.
Looking into this metric will help you to understand the efficiency of your present sales funnel, and create business strategies that can generate the highest profits:
The math for calculating Conversion Rate is as follows, which should be measured for every stage in the funnel separately:
(Number of total sales) / (Number of leads)*100
3. LCR (Lead Closed Rate)
LCR is one of the most vital metrics for your business growth, as it lets you understand how many prospects are prepared to accept subscription of your service over a specific period of time.
By performing this calculation you will be able to view how much of your targeted traffic you get and whether your sales team’s processes place the orders in a proper way.
The math for calculating LCR is as follows:
(Number of customers over a certain span of time) / (Number of total leads over a certain span of time)
4. Customer Churn Rate
Customer churn in any business measures the loss of customers that is counted by the absence of payment or purchase over a certain span of time.
Customer churn is a term that is applicable to any line of business where purchases are made on a regular basis.
Therefore Customer Churn Rate is an extremely crucial metrics for companies with transactional or subscription-based business models like a Cloud Based CRM software platform.
Now, as Customer Churn Rate is not very revealing metrics on its own. Therefore, you need to gauge the structure of the churn itself:
• Which segment of the customers is more prone to churn and more importantly why?
• What factors most often are the causes of your churn?
• What are the structural tendencies and dynamics of your churn?
The math for calculating Customer Churn Rate is as follows:
(Number of customers that left at the end of a month)/(Number of total customers that paid for the following next month)*100
5. MRR (Monthly Recurring Revenue)
MRR is considered as the cornerstone of any SaaS business. It is a metric that determines the SaaS solution’s attractiveness in the eyes of investors and entrepreneurs.
As for Monthly Recurring Revenue and its purpose, this indicator in sales makes an average of all your subscription plans, calculation periods and places them in one common metrics, while tracking its change with the flow of time.
The math for calculating MRR is as follows:
(Number of customers)*(Monthly revenue of your business)
6. LTV (Customer Lifetime Value)
We all know that acquiring fresh customer costs five to seven times more than retaining your present ones.
Now, if your business believes in this and wants to act on this information and considers it to be helpful for the growth of your organization, you can easily calculate how much your customers spend, how often they make their purchases, what bonuses and programs they are interested in, which can help you to view the whole picture of your businesses’ profitability and how you can manage it over time.
The most popular math for calculating LTV is as follows:
(Customer’s average order cost)*(Number of purchases)*(Customer’s loyalty period in your business)
Now that we have reviewed six most popular and talked about SaaS metrics in sales and have illustrated how you can use them, you can easily use these indicators while working with your easy to use CRM software to create the most beneficial strategies for your business growth.