Saas Reporting Analytics, The Executives' Guide to New Business Building
15 mins readMar 15, 2023
In today’s digital age, businesses generate vast amounts of data from multiple sources, including customer interactions, sales transactions, marketing campaigns, and website visits. However, more than data is needed to drive business success. It would be best to have robust reporting and analytics tools to make sense of the data and turn it into actionable insights. For instance, Churnfree has recently gained popularity as a SaaS reporting analytics tool. Churnfree provides businesses with real-time insights into their data, enabling them to make informed decisions, improve performance, and drive growth.
This article will explore the key best practices for implementing SaaS reporting analytics and how they can help you enhance your business intelligence.
SaaS Reporting Analytics and Growth Metrics You Should know
The best approach to prepare the best customer retention strategy is by knowing the basic knowledge of SaaS reporting analytics metrics and how they can help you enhance your business intelligence.
1. Churn Rate
The churn rate is the percentage of customers who have stopped using a product or service over a given period. In SaaS, it is essential to track churn rate as it provides insights into customer satisfaction levels. To calculate the churn rate, divide the number of customers who have stopped using the product by the total number of customers.
Determine the number of customers who have canceled or not renewed their subscription within a given period. This can be a monthly or quarterly period, depending on the company’s preference.
For example, if a company had 1,000 customers at the beginning of the month and 50 of them canceled their subscriptions during the month, the churn rate for that month would be 5%.
SaaS companies use SaaS reporting tool to track their churn rate regularly and identify trends to take steps to improve customer retention. A high churn rate can indicate that customers are unsatisfied with the service, and the company may need to improve its product or customer support.
2. Customer Lifetime Value (CLTV)
Customer Lifetime Value (CLTV) is the total value that a customer brings to a business over their lifetime. CLTV is a critical SaaS reporting analytics as it helps businesses understand each customer’s profitability. Calculating Customer Lifetime Value (CLTV) is essential for SaaS companies to understand the overall value a customer brings to their business over time. To calculate CLTV, multiply the average revenue generated per customer by the average customer lifespan. Here are the steps to calculate CLTV:
Determine the average revenue per customer per month.
This can be calculated by dividing the total revenue earned in a given time period by the total number of customers during that same time period.
For example, if a company earned $100,000 in revenue in a month and had 1,000 customers during that same month, the average revenue per customer per month would be $100.
Determine the average customer lifespan.
This can be calculated by analyzing historical data to determine how long the average customer stays subscribed to the service.
For example, if the average customer stays subscribed for 12 months, the average customer lifespan would be 12 months.
Multiply the average revenue per customer per month by the average customer lifespan.
Using the example above, the calculation would be $100 x 12, which equals $1,200.Subtract the cost of acquiring and servicing the customer from the result.
This includes all expenses related to acquiring the customer, such as marketing and sales costs, as well as all expenses related to servicing the customer, such as support and development costs.
For example, if the cost of acquiring and servicing the customer is $400, the final CLTV would be $800.
By calculating CLTV, SaaS companies can better understand the long-term value that each customer brings to their business and make informed decisions about marketing, sales, and customer retention strategies. It’s important to regularly review and update CLTV calculations as business conditions and customer behavior change over time.
3. Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is the total cost incurred in acquiring a new customer. This cost includes all marketing and sales expenses. It is essential to track CAC as it helps businesses to determine the effectiveness of their marketing and sales strategies. To calculate CAC, divide the total marketing and sales expenses by the number of new customers acquired.
Determine the total sales and marketing expenses for a given period.
This includes all expenses related to sales and marketing, such as salaries, advertising, and promotional expenses.
For example, if a company spent $100,000 on sales and marketing in a month, the total cost of sales and marketing expenses would be $100,000.
Determine the total number of customers acquired during that same period.
This includes all new customers who signed up during the time period.
For example, if a company acquired 1,000 new customers in a month, the total number of customers acquired during that month would be 1,000.
Divide the total cost of sales and marketing expenses by the total number of customers acquired.
Using the example above, the calculation would be $100,000 divided by 1,000, which equals $100.
4. Monthly Recurring Revenue (MRR)
Monthly Recurring Revenue (MRR) is the total revenue a business generates monthly from its recurring subscriptions. To calculate MRR, multiply the total number of customers by the average subscription price. MRR is a critical metric in SaaS, providing insights into revenue growth rates. By following the steps outlined below, SaaS companies can calculate their MRR accurately and use it to make informed business decisions.
Determine the number of active customers at the end of the month.
An active customer is defined as someone who has paid for the service within the past month and is still using it. Exclude any customers who have canceled or paused their subscription during the month.
Determine the average revenue per user (ARPU). ARPU is calculated by dividing the total revenue for the month by the number of active customers. For example, if a company generated $10,000 in monthly revenue and had 100 active customers, the ARPU would be $100.
Multiply the number of active customers by the ARPU.
For example, if a company had 200 active customers and an ARPU of $100, the MRR would be $20,000. Adjust the calculation accordingly if a company has changed its pricing or subscription plans during the month.
It’s important to note that MRR does not include one-time or non-recurring revenue, such as setup fees or one-time purchases. It only includes revenue generated by recurring monthly subscriptions.
5. Net Promoter Score (NPS)
Net Promoter Score (NPS) is a SaaS reporting analytics used to measure customer loyalty and satisfaction. NPS measures how likely customers are to recommend a product or service to others. To calculate NPS, businesses ask customers to rate on a scale of 1-10 how likely they are to recommend the product or service to others.
6. Gross Margins
Gross Margins are a business’s profits after deducting the cost of goods sold. To calculate gross margins, subtract the cost of goods sold from the total revenue generated. Tracking gross margins is essential in SaaS as it helps businesses to understand their profitability.
7. Conversion Rate
Conversion rate measures the percentage of website visitors who take a desired action, such as signing up for a trial or making a purchase. Increasing the conversion rate can help improve revenue and growth.
8. Customer Satisfaction (CSAT)
Customer Satisfaction (CSAT) is a SaaS reporting analytics used to measure customers’ satisfaction with a product or service. Tracking CSAT is essential in SaaS, providing insights into customer loyalty and retention. To measure CSAT, businesses can conduct surveys or ask customers to rate their experience on a scale of 1-10.
9. Time to Value (TTV)
Time to Value (TTV) is when a customer starts realizing the benefits of a product or service. Tracking TTV is essential as b2b SaaS metrics as it helps businesses to understand the onboarding process and improve customer satisfaction. To measure TTV, businesses can analyze how long a customer can start using the product or service after signing up.
10. Burn Rate
The burn rate is when a business spends its cash reserves. Tracking burn rate is essential as b2b SaaS metrics as it helps businesses to understand their financial position. To calculate the burn rate, divide the total amount of cash reserves by the monthly cash outflow.
11. Active Users
Active Users are the number of customers who are currently using a product or service. Tracking Active Users is crucial as b2b SaaS metrics as it provides insights into customer engagement and retention. To measure Active Users, businesses can analyze how many customers use the product or service regularly.
12. Referral Rate
Referral Rate is the rate customers refer others to a product or service. Tracking Referral Rate is essential as b2b SaaS metrics, providing insights into customer loyalty and satisfaction. To calculate the Referral Rate, divide the number of referrals by the total number of customers.
Why knowing customer churn is vital for your business?
Customer churn is a critical SaaS reporting analytics that can significantly impact a SaaS company’s revenue, growth, and profitability. By monitoring and reducing customer churn, SaaS companies can improve customer satisfaction, reduce CAC, increase CLTV, and gain a competitive advantage in the market. Therefore, customer churn should be a top priority for any SaaS company that wants to succeed in today’s competitive landscape.
Impact on revenue: When customers churn, they stop paying for the company’s services, which can result in a significant loss of revenue. For SaaS companies, which rely on recurring revenue, customer churn can devastate their bottom line.
Cost of acquisition: Acquiring new customers is generally more expensive than retaining existing ones. When customers churn, SaaS companies need to spend more money to acquire new customers to replace them. This can drive up the CAC and make it more difficult for the company to achieve profitability.
Customer satisfaction: Customer churn is also one of the essential b2b SaaS metrics for measuring customer satisfaction. When customers churn, it is a sign that they are not satisfied with the company’s products or services. By tracking customer churn, SaaS companies can identify the factors driving customer dissatisfaction and take steps to address them.
Impact on growth: When customers churn, SaaS companies lose revenue, potential advocates, and referrals. On the other hand, by reducing customer churn, SaaS companies can improve customer lifetime value (CLTV) and increase revenue, fueling growth and expansion.
Competitive advantage: SaaS companies that maintain low churn rates are more attractive to potential investors and customers. Low churn rates are a sign that the company has a loyal customer base and is delivering value to its customers.
Benefits of the SaaS Retention Tool
Millions of online businesses have revolutionized how digital businesses operate, providing flexibility, scalability, and cost-effectiveness benefits. However, with the growing competition in the industry, it has become more challenging for SaaS companies to retain their customers. This is where the SaaS retention tool comes in handy. A SaaS retention tool is essential for any SaaS company that wants to improve customer retention, enhance the customer experience, increase revenue, optimize pricing strategies, and streamline operations. By leveraging the power of these tools, SaaS companies can stay competitive in a crowded market and provide exceptional value to their customers.
- Improve customer retention: The primary benefit of using SaaS retention tool is that they help improve customer retention. These tools provide insights into customer behavior, usage patterns, and other data that can be used to identify potential churn risks. By identifying and addressing these risks, SaaS companies can take proactive measures to prevent customer churn, such as providing personalized support and engagement.
- Enhance customer experience: By monitoring customer feedback, usage patterns, and other metrics, SaaS companies can identify pain points and areas for improvement. This information can be used to develop new features, improve existing ones, and provide a better overall customer experience.
- Increase revenue: By improving customer retention and enhancing the customer experience, SaaS companies can reduce customer churn and increase customer lifetime value (CLTV). This, in turn, can lead to increased revenue and profitability.
- Optimize pricing strategies: By analyzing customer behavior and usage patterns, SaaS companies can identify which pricing plans are most effective and which ones need improvement. This information can be used to adjust pricing strategies to maximize revenue and profitability.
- Streamline operations: SaaS companies can save time and resources by automating tasks such as customer onboarding, engagement, and support—allowing them to focus on other critical tasks, such as product development, marketing, and sales.
Measuring SaaS growth with Churnfree
Churnfree is a one-solution platform helping hundreds of SaaS businesses calculate churn rates and help them in building robust customer retention strategies. We live in a world where businesses make data-driven decisions to survive the competition. Without the help of automation-powered and AI-based metrics, it is nearly impossible. Churnfree is a hand-picked choice of SaaS-based businesses to find the right churn rate, why customers decide to churn, and how to improve user retention strategy.