11 B2B SaaS Metrics You MUST Track
B2B SaaS is complex: It requires constant tracking & optimizing. That is where B2B SaaS metrics come into play. Thanks to B2B SaaS metrics, you have the chance to analyze and examine your company’s potential to generate new customers and potential customers, attract visitors and increase profits.
Continue reading if you’re interested in increasing your SaaS company’s revenue and attracting more customers by optimizing your metrics. This article will become a handbook for you on B2B SaaS metrics.
#1 B2B SaaS Metric: Feature Engagement
Why is Feature Engagement important for B2B SaaS?
In SaaS, feature engagement lets you understand how your users interact with your product’s features. With feature engagement, you can choose which elements on your product are used the most and not used much. When you determine your most used features, you can research why these features are used more than others. Thus, you can use these reasons to improve your less prominent features. Likewise, by identifying which of your features your users use less than other features, you can work to highlight your underutilized features.
How to measure Feature Engagement?
There are several stages to measuring feature interaction. First, you must identify the inputs required to see companies interact with your site’s feature. For example, how much time users spent on that feature or how long they actively used that feature.
To better understand your product’s engagement rate and each feature’s affect on revenue, you need marketing and revenue data on top of your product data.
#2 B2B SaaS Metric: Activation Rate
Why is the Activation Rate significant for B2B SaaS?
The activation rate measures how quickly and in the desired way users can reach the product’s value. In other words, the time and manner in which users get this action, which is counted as a “successful action,” is analyzed.
Each product has a different value, so You should measure the activation rate differently.
A low activation rate may indicate issues with the user experience or customer onboarding. For this reason, the development of SaaS companies needs to measure the activation rate and act according to this measurement, especially at the beginning of the user cycle.
How to calculate Activation Rate?
Once you have the necessary data to calculate the activation rate, it is pretty simple to make the calculation. The formula required to calculate the activation rate is as follows:
Activation rate (%) = (Number of users who completed the successful action) / (Total number of users who signed up) * 100
#3 B2B SaaS Metric: MRR
Why is MRR important for B2B SaaS?
MRR is short for monthly recurring income. As the name suggests, MRR refers to the predictable revenue from the monthly services that the customer base on SaaS platforms recurs.
MRR is invaluable to you, especially if your company offers subscription-based pricing. Thanks to this metric, you can calculate your current expected earnings and predict where you can move your company’s earnings with various improvements.
How to calculate MRR?
Calculating MRR is relatively easy. You have to multiply your monthly subscriber count by your revenue per subscription.
MRR = (number of the subscriber of the monthly plan) * (average revenue per user)
#4 B2B SaaS Metric: LTV
Why is LTV important for B2B SaaS?
Lifetime value is a measure of the revenue a user generates for you over the time they use your service. If your users are satisfied with your service, they will remain users of your company for a more extended period. With lifetime value, you can determine how user experiences contribute to your company’s profitability.
Likewise, lifetime value indicates user loyalty. If your Lifetime Value is high, your users are satisfied with your service and have been using your service for a long time. That is important for your company’s reputation.
Another reason why tracking LTV is so important is its relationship with CAC (Customer Acquisition Cost). If your CAC has a higher value than your LTV, you will not be able to make a profit. Therefore, following your LTV has a large share in the yield of your company.
How to calculate LTV?
The LTV calculation method involves pretty simple math:
LTV = (Average value of a sale) * (Number of repeated transactions) * (Average holding time in months or years)
#5 B2B SaaS Metric: ACV (Annual contract value)
Why is ACV important for B2B SaaS?
ACV, or annual contract value, represents the amount of value a contract brings over the year. The term is often used in SaaS companies that do business on one or more year contracts.
Another reason for calculating ACV is to be able to compare this value with CAC. Based on your CAC value, you can calculate on average how long it will take to reach the targeted ACV profit. There is an inverse relationship between CAC and ACV, as between LTV and CAC. So the higher your CAC amount, the longer it will take to reach your target ACV.
How to calculate ACV?
ACV calculation is quickly done as follows:
ACV = (Total contract value(excluding one time fees)) / (Total years in the contract)
#6 B2B SaaS Metric: MQLs
Why is MQL important for B2B SaaS?
MQL, which stands for marketing-qualified leads, helps you benchmark all leads and identify the highest quality leads. In other words, potential customers with marketing qualifications are ready-to-sell customers, and the rate of being your actual customers is relatively high. If you don’t set your MQLs, you won’t know who you should reach first. This situation causes you to waste your marketing budget and time with candidates who are not convinced to become your customers.
How would you define your MQL?
You can distinguish MQLs from others based on their relevance. First, you need to identify your ideal lead options. When determining this, use questions such as which industries and sizes of companies are more likely to work with you. Then, monitor and analyze the interaction of this group with your company. Thanks to SaaS marketing tools, you can carry out this process in the easiest way.
For sales, you should first focus on your MQL audience. However, you can also create your MQL if you follow the right paths. In addition, remember that even if you manage all these processes correctly, you should regularly measure how the process is performing. Thus, nothing escapes your notice, and your successful sales rate will increase the most.
#7 B2B SaaS Metric: Conversion Rate
Why is Conversion Rate important for B2B SaaS?
Conversion Rate is used to express the completion rate of the desired behavior. Conversion rates are significant when determining marketing strategies because they allow you to compare all your marketing channels with each other. In this way, you can measure which channel is more successful for your company than the other. Moreover, you can manage your budget correctly.
Conversion rates don’t just show companies’ rates converting into customers today. Using your current data allows you to predict which channel will bring in how many companies as customers. In addition to these, you also measure whether everything is going well with your marketing channels.
For example, if users visiting your site encounter an error in the user interface of your blog page that you have not noticed yet, your conversion rate from this platform will be very low. In this way, you can understand that something is wrong and intervene in a short time.
How to calculate Conversion Rate?
The conversion rate is determined by dividing the total conversion by everyone who interacts. The formula is as follows:
Conversion rate = (Total Attribitued Conversions) / (Total number of visits) * 100
#8 B2B SaaS Metric: Email open rates
Why is Email Open Rate important for B2B SaaS?
Email open rates are necessary to track companies that become potential customers after receiving emails. However, you may encounter some factors that will prevent this method from working correctly. For example, users may prefer to read your email without downloading the image file. However, if they didn’t download the image, when they click on a link in your email, this is recorded as the email click-through rate. In such a case, you will not be able to track the email even if the email served the purpose you wanted.
Calculating the open rate of emails is pretty easy if you have the necessary data. You can reach the result by dividing the number of opened emails by the number of all emails sent.
Email Open Rate = (Emails Opened) / (Emails sent + Emails bounced)
#9 B2B SaaS Metric: NPS
Why is NPS important for B2B SaaS?
In its simplest terms, Net Promoter Score (NPS) is a customer satisfaction survey based on the probability that your customers will recommend your product to someone else on a scale of 1 to 10. You should note that 80% of customers value online reviews as much as personal recommendations. In this way, you can understand more clearly how important NPS is.
In addition, NPSs allows you to learn about companies dissatisfied with your service. You can identify the common points between these companies. These commonalities may be industry, demographics, or age distribution in the company. According to these analyzes, you can determine which areas of your service are more appealing and in which areas it is lacking, and you can make improvements for a more inclusive system.
How to calculate NPS?
If a company has evaluated you between 0-6, they are not very satisfied with your service. The passives group is those who give 7-8 to your company. These companies have no complaints about your service, but they will not make an effort to recommend us to others. Those who support you are the ones who give you 9-10. Passives are not included in the NPS account. The NPS calculation is done as follows:
NPS = % promoters – % detractors.
As can be understood here, your NPS value can vary between -100 and +100. Of course, having this score as high as possible is essential for attracting new users to your company.
#10 B2B SaaS Metric: Answers to churn surveys
Why are churn surveys important for B2B SaaS?
Straightforwardly, churn surveys are short survey questions that you send to collect feedback from your user when they terminate the service they receive from you or drop their purchase. Your company needs to receive this feedback. Then, you can improve the product and keep your service interruptions to a minimum.
Although it is common for SaaS companies to send casualty surveys via email, there is usually a better way. You can deliver Churn surveys in in-app surveys and email surveys. In-app loss surveys often collect more feedback than email surveys. That is because in-app surveys appear within the app as soon as you unsubscribe. That means users are more likely to fill out a survey that pops up automatically.
How To Analyze Churn Surveys?
To analyze churn surveys, you must first ensure a churn survey suitable for analysis. A study with many open-ended questions is complicated to follow and interpret. For this reason, a questionnaire that consists of multiple-choice or scoring questions, on which you can put the system on an automatic basis, will be more prone to analysis.
Once you’ve made sure you have a good survey, consider data about why companies stopped using your service. In this way, you can replace the features that negatively affect users in your company with more beneficial ones. You can also predict what innovations you need to make.
#11 B2B SaaS Metric: Answers to pricing surveys
Why are Pricing Surveys important for B2B SaaS?
Pricing surveys are essential because they help you see how much people are willing to pay on average for your service. In this way, you can predict what the companies you expect to benefit from your service think about the pricing you have determined for your service. You can also choose the most optimal pricing in an increasingly competitive environment.
A well-organized pricing survey reveals your users’ price desires and willingness to buy. Using these surveys as an excellent tool to get ahead of your competitors is possible.
You now have all the necessary B2B SaaS metrics you need to track and work on that. To measure & optimize them, you can use a SaaS analytics tool, which would make it much easier for you & your team.
The 40% rule is a simple rule of thumb to measure the business success of SaaS companies. It is calculated as:
GP Ratio = Growth rate + Profit
This calculation means that the sum of your growth rate and profit rate must not fall by 40% to be successful. For this reason, your expenses should change in direct proportion to your growth. For example, if you are showing an increase of 30%, you need to make a profit of at least 10%. Or, if you are growing 60%, even if you lose 20%, this will not detract from your company’s success.
As it is valid in every company, the gross margin is found by subtracting the total cost of goods sold (COGS). That applies to SaaS companies as well but is a bit too general. For a good SaaS margin, it is necessary to improve the COGS with additional categories. These extensions can be, for example, titles such as customer successes dev ops. The number and titles of these expansions may vary, depending on your company’s applications and business model.
Because the valuation scales of SaaS and cloud-based software companies are different from traditional software companies, traditional companies generally use two valuation scales: the market approach – analyzing and the discounted cash flow (DCF) approach, which explores the market approaches of similar companies.
Buying competition brings profits with it. On the other hand, almost all SaaS businesses value themselves with a monthly subscription process. Therefore, their earnings are more predictable than traditional companies. In addition, SaaS companies keep their future earnings forecasts more stable by making a long-term agreement with their satisfied customers. In addition, the SaaS domain has more negotiation activity space than the traditional domain.