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Understanding the vital KPIs and measuring them correctly is the key to running effective marketing campaigns and growing your B2B SaaS company tremendously.
However, for most SaaS B2B business startups, the main challenge is determining the most vital key performance indicators to track.
It can also be difficult to monitor different aspects of your product, visualize performance, proactively identify problems, and manage and grow your business.
That’s why we created this blog post to teach you the 6 most important SaaS KPIs you must track for your B2B business.
Let’s get started.
1. Customer Acquisition Cost (CAC)
Customer acquisition cost is the KPI that measures the cost your SaaS business incurs in attracting and acquiring new customers.
This cost involves running B2B SaaS lead generation tactics, marketing, overheads, and any other cost related to growing your clientele.
This KPI is crucial in that it helps companies assess their current spending and determine whether they can invest more in acquiring new customers.
To calculate CAC, you determine the total cost incurred to get new customers for a given period and then divide it by the number of customers you acquired.
Here is the formula for calculating customer acquisition cost:
2. Revenue Churn Rate (RCR)
Also known as Monthly Recurring Revenue Churn, Revenue Churn Rate is a powerful key performance indicator to track for your SaaS company as well.
Tracking this KPI can help you understand the rate at which your company loses customers or revenue as a result of downgrades, non-renewals, and cancellations within a given period.
It’s a vital KPI to track if you offer a variable subscription pricing model that depends on the number of licenses a customer purchases.
Remember to use subscription management software to effectively manage customer subscriptions as you track Revenue Churn Rate
As a rule, you should track your revenue churn rate quarterly to optimize your revenue.
Here is the formula for calculating RCR:
3. Customer Churn Rate
It is a measure of the number of paying customers lost during the tracking period.
For B2B SaaS companies, churn is inevitable. But to get recurring income, you must create effective strategies to retain your existing customers, attract new ones and minimize churn rates.
Thus, tracking your churn rate can help you evaluate the effectiveness of your marketing, improve your bottom line, and double down on your customer retention strategies.
To calculate Customer Churn Rate you need to determine the total number of customers at the beginning of the tracking period.
Then, divide it by the number of customers lost during the same period. Then you multiply the results by 100.
Here is the formula:
4. Monthly Recurring Revenue (MRR)
Monthly Recurring Revenue is the KPI you must track to determine the amount of revenue you’re generating from your customers each month. This involves the total monthly revenue coming from product upgrades, renewals, and new sales.
Tracking this KPI can help you understand the performance of your company in terms of profitability and set monthly growth goals.
To calculate MRR for a subscription model, you need to determine the total number of existing customers plus new ones.
Then, subtract the number of churned(lost) customers and multiply the results by the monthly subscription fee.
Here is the simple formula:
Apart from this, you can use the right type of recurring billing software to automate your recruiting process and manage your recurring revenue effectively.
5. Customer Lifetime Value (CLV)
This KPI shows the total income your company generates from a single customer during their time as paying customers.
Most B2B SaaS companies use this KPI to evaluate their customer relationship-building strategies.
It can also help you assess the effectiveness of your marketing efforts so that you can adjust your strategies and optimize them CLV.
To calculate CLV, you need to find out the Average Revenue Per Account.
It’s the average revenue generated out of all your current accounts. You can get this by dividing your Monthly Recurring Revenue by the total number of users.
After that, you simply divide the value by your customer churn rate during the tracking period.
Here is the formula:
Meanwhile, you can use account software such as Zoho Books, FreshBooks, QuickBooks to calculate different rates automatically.
6. Lead Velocity Rate (LVR)
Another important SaaS KPI to track for your B2B business is Lead Velocity Rate.
This KPI measures your business’s growth in terms of real-time qualified leads month to month.
It shows the number of potential customers currently in your pipeline who are likely to convert into paying customers.
LVR can help you know how effective your pipeline is as well as your future company growth potential.
Here is the formula for calculating Lead Velocity Rate:
This post highlighted 6 important SaaS KPIs you must track if you want to know what’s working and what’s not so that you can adjust your sales and marketing efforts appropriately.
Choose the right KPIs that are relevant to your type of business and don’t be driven by benchmarks that work for other businesses.