Top 16 SaaS Sales Metrics and Tools To Use
Sales metrics are measures which help SaaS salespeople create or modify their roadmaps and strategies accordingly. There are numerous sales metrics for the different needs of SaaS companies.
In this article I will list 16 of the most popular SaaS sales metrics that will help you understand how your SaaS performs.
MRR (Monthly Recurring Revenue)
Monthly recurring revenue is the predicted amount of revenue that a company can expect on a month to month basis.
Companies function with the sole purpose of profitability. In order to be profitable; a company needs to have steady cash flow to keep the wheel of business spinning.
A SaaS that uses MRR as a sales metric does not only know its monthly revenue, but it can also compare its monthly revenue with previous months. This gives the company an insight about its growth and future investments.
Revenue churn is a key customer retention metric that measures the loss in revenue.
Revenue churn does not give a ratio, instead provides a whole number.
This loss in the revenue of a company might have happened due to various reasons, and it can not be known for sure. However, some possible reasons for revenue churn can be as follows:
- Competitive losses
- Lost contracts and cancellations
Even if revenue churn gives amount of lost revenue for a company it should always be taken into account with another sales metric customer churn.
It is possible and common for companies to pick either revenue or customer churn to track. However, both of these metrics are crucially important.
Customer churn is the ratio of user’s stopped using a company’s product or service in a given time period.
Customer churn is one of the demotivating metrics for companies, but if customer churn and the reasons behind it are analyzed, companies can have an understanding of their lost customers.
You can use HockeyStack’s free survey tool to create churn surveys and get feedback from your customers!
With the utilization of this metric, SaaS companies can realize the sad truth about their customer retention.
Revenue churn plots only the amount of revenue loss but when it is combined with customer churn, companies can understand whether the loss is caused by a specific customer, small customers or large customers.
Conversion is the main goal of any that you can think of. Without conversions even the best marketing campaigns are worthless.
Conversion rate is the percentage of visitors who visited your website and completed a desired goal. This can be clicking on a given link or purchasing the service you are offering to them.
A high conversion rate indicates that your marketing campaigns and the product your SaaS offers aligns with customer needs. On the other hand, a low conversion rate means there is a problem with your marketing, product offering, onboarding, or a combination of these.
To understand why you have a low conversion rate, you can create an exit-intent survey on your signup page, so that you can get feedback.
Demo is the demonstration of a product or a service to a customer. Salespeople conduct demos to show their product or services to users in order to increase their conversion rates.
For demos I can mention some rates such as demo- completion rate. This rate indicates how many of the planned demos are conducted and gives an insight about the activeness of the salespeople conducting these demos.
Meetings booked is defined as the number of times visitors used the scheduling page to set up a meeting. Even if this metric does not indicate much alone when the data from this metric is combined with other metrics this can be a very useful tool for companies.
Annual Recurring Revenue (ARR)
This metric is actually very similar to the first metric introduced which is Monthly Recurring Revenue (MRR) as it can be understood from the names. ARR focuses on the revenue generated by a contract or a submission in a yearly perspective.
The similarity between ARR and MRR can be noted mathematically, since MRR is defined as the amount of revenue that a company can expect on amonth-to-monthh basis. ARR is the annualized version of this metric.
Average Revenue per Account or User (ARPA)
As the name of this SaaS metric suggests, ARPA indicates the amount of money generated per account or user.
ARPA can be calculated monthly or annually depending on the choice of the company. If a company is focusing more on ARR than the more SaaS-specific metric MRR, I would suggest them calculating ARPA on a monthly basis.
ARPA can be calculated by dividing your MRR to your number of accounts. If a company is seeking ARPA on an annual basis it should be replacing MRR by ARR in the formula.
Since this is an average, it is possible to mention its cons. For example, if there exists a huge price gap between two subscription plans, such as a normal subscription plan costing 5 dollars per month and a premium subscription plan costing 100 dollars per month.
In such a case, companies should not rely on ARPA if they have a big price gap between different subscription plans. Because loss of a Premium Subscription Plan would mean significant customer churn, but it means very important revenue churn.
Therefore while this metric is being used it is essential that it is being used together with revenue churn and customer churn to avoid any mislead.
Lead to Close Rate
A lead is a customer who shows interest in the products or services you are offering. Out of these leads, some of them might make purchases and some of them might not. Therefore, it should be clear that leads never mean the number of customers but potential customers.
Leads to close rate calculates the ratio of the number of sales you made to the leads you had in the first place.
Leads to close rate is an important sales metric for companies. It gives an insight into the success of sales reps. For example, a sales rep with a high lead to close rate is a successful one who has the capability to close a deal and turn a lead into an actual customer.
Similar to other sales metrics, lead to close rate is highly dependent on industry. For example, while 25 percent would indicate a very high ratio for one industry, it can be very low for one another.
Lead to close rate comparison between industries might be misleading. Therefore while companies are comparing their sales success with this metric it is very important that the comparison is being done specific to one industry and not being compared to other industries.
If your company has a higher lead to close ratio than other companies functioning in the same industry then it can be concluded that your company is outperforming other companies. Thus is a successful one in terms of sales.
If this ratio of your company is lower than the industry average, it means your company cannot convert leads into sales and therefore needs to fix some issues. These issues may be about the pricing of your services, qualifications of your sales reps, and the quality of your product.
Customer Lifetime Value (LTV)
Customer Lifetime Value (LTV) shows the total amount of revenue a user will generate before they churn (cancel their subscription).
Effective Uses of LTV:
LTV is an important metric because it gives you insights about different perspectives of your company. Firstly, with the effective use of LTV, companies can decide on the customer acquisition cost. If your average customer acquisition cost is higher than your LTV, you should probably think about lowering your customer acquisition cost or finding a way to increase your LTV.
If you calculate your LTV for different marketing channels, you can identify which types of users generate the biggest of your revenue, and you can focus on increasing your users from these market channels with specifically targeted marketing campaigns.
If you can identify the most important marketing channels for your SaaS businesses, you can focus on minimizing the customer churn from these channels. Decreasing customer churn from channels with the highest LTV, will result in a very high increase in revenue.
Customer Acquisition Cost (CAC)
Customer Acquisition cost (CAC) is the amount of money spent in the purpose of acquiring a single customer.
By calculating your company’s CAC, you will be able to compare it with your LTV and by this comparison you will understand whether you have a successful and effective marketing campaign or are you focusing only on the growth without thinking about payback periods and long-term outcomes.
LTV/CAC ratio is important as it was mentioned in the previous metric (LTV). According to David Kellog if your company has a LTV/CAC ratio smaller than 3.0 than you are spending too much for your marketing and sales campaigns.
Simply it can be concluded that the LTV/CAC ratio gives how effective and therefore sustainable your company’s growth is. Therefore you should focus on increasing this ratio by increasing your LTV or decreasing your CAC.
Referral Rate accounts for the ratio for the volume of referred purchases to the total purchases made as a percentage.
A high referral rate generally is a good sign for the quality of your goods or services however it is not always a good sign. A high referral rate might also show that your other ways of customer acquisition are ineffective.
No-touch Sales vs High-touch Sales
No touch sales means during the sales funnel there is no human to human interaction. Snacky machines and coffee machines can be considered as a no – touch sale.
In no-touch sales marketing of the product or service is generally being made by free trials, digital marketing (email marketing etc.).
On the other hand, high-touch sales are more traditional in which sales are highly dependent on human to human interaction. In high-touch sales, there exists a sales rep who follows the leads given by the marketing team and communicates in order to book demos and book meetings to close a sale.
A company does not have to choose between these two sales models but should adapt a good combination of these two with respect to industry’s needs and dynamics.
Website Visitor to Lead Rate
Website Visitor to Lead Rate gives a ratio of how many of your website visitors convert into actual leads. This metric is important. If this ratio is relatively high (compared to the industry of your company) then it can be concluded that you have a convincing website with good copy, which can generate customers.
If this rate is relatively low, then you might be fooled with the growing numbers of your website visitors who do not even convert into leads.
Number of Deals Closed
Website visitor to lead rate, referral rate, and conversion rate are very important metrics for SaaS businesses, but there is a metric which affects each of these metrics and focuses on the main goal of any business, and it is the number of deals closed.
Number of deals closed means the number of successful sales conducted by your company. This metric also helps you evaluate the success of your sales reps when examined one by one.
Tools to Track SaaS Revenue
What is Profitwell?
Profitwell is a cloud-based business intelligence and subscription management platform founded by Patrick Campbell in 2012.
Profitwell focuses on subscription and growth of your company’s recurring revenue. It brings together all of your recurring revenue business’s financial, usage, and attribution data to one place.
Profitwell offers all of the essential marketing metrics as well as sales metrics as its features and allows its users to reach each of these metrics without any hassle. Some of these features are:
- Engagement metrics
- Acquisition metrics
- Revenue metrics
- Data segmentation
- Pricing software
- ROI analysis
- Subscription reporting and analysis
Profitwell offers its users two different packages, one being free. The other pricing option of Profitwell is enterprise which can be customized in accordance to your company’s needs.
Profitwell offers integrations under two different categories:
Pros of Profitwell
- It offers an understandable Android and IOS app.
- You don’t have to worry about your data safety; it is a secured GDPR compliant platform.
- Once Profitwell is setup and coordinated it gives excellent insights about aforementioned metrics
- Profitwell takes advantage of AI to a great extent in the purpose of minimizing errors.
Cons of Profitwell
- Understanding and comprehending some of the metrics might be difficult for new businesses.
- Profitwell users can have difficulty with data transfer and integration with some different tools and platforms.
What is Salesforce?
Salesforce is a customer relationship management system that connects businesses and their customers. It’s a single, integrated CRM platform that gives all of your departments a single, shared picture of every customer, including marketing, sales, commerce, and service.
Salesforce was founded by a former Oracle executive Marc Benioff in 1999.
- Contact Management.
- Customer Engagement Tools.
- Workflow Creation.
- Task Management.
- Opportunity Tracking.
- Collaboration Tools.
- Intuitive, Mobile-Ready Dashboard.
Unlike Profitwell, Salesforce has numerous pricing options depending on the intended purpose of the users. You can check out the pricing options of Salesforce here.
You can see the integrations of Salesforce here.
Pros of Salesforce
- It is highly adaptable.
- It can be easily managed. There is no need for deep IT knowledge.
- It offers numerous options with various apps.
- It has over 150.000 customers with a ranging customer profile including multinational corporations.
- The platform is being evaluated by its users and developer’s on a daily basis to remove any problem it can possibly have. So that the users utilization of Salesforce’s tools expand.
Cons of Salesforce
- It is relatively expensive.
- It’s configuration is complex.
- Complex interface makes the easiest tasks time-consuming.
- It has a poor reputation for customer support.
What is Freshworks?
Freshworks facilitates the process of delighting customers and employees. It does this by solving complex business problems without too technical IT knowledge needs. It was founded by Girish Maathrubootham in 2010.
Features of Freshwork
- Product Technology
- Extended CRM
- Analytics and Reporting
- Customer Service and Reporting
- Marketing Automation
- Sales Force Automation
Freshworks offer different tools for different departments so pricing of Freshworks products vary. You can see them here.
Integrations of Freshworks can be seen here.
Pros of Freshworks
- Sales sequences
- Importing contacts and accounts
- Synchronization of calendar
Cons of Freshworks
- Offline data access is not offered.
- You have to choose a higher plan to make good use of Freshworks.
- Long adaptation period for not tech people.
All of the above tools and metrics can be used in order increase your company’s performance. In order to increase efficiency and a effectiveness of your company you should decide on which KPIs to track. Out of the given tools each of them has its own advantages and disadvantages. In the light of this information you should be picking the tool you will be using in accordance with the metrics and integrations you will need.
If you are looking for a no-code SaaS analytics tool you should also checkout HockeyStack.
In the early stages of startups 144% is an average growth rate by means of ARR. As the company grows growth rate falls into 15% to 45% for ARR.
A good conversion rate is considered to be around 3%-5% and a strong one is typically 8%.