Specific metrics define success for software as a service (SasS) companies. Whether you want to secure additional funding or are simply focused on strategic growth, monitoring this data is vital. With Sage Intacct, the cloud-based financial management solution, you can easily see the numbers that reflect the health of your organization and share those statistics with investors.
Here are six essential metrics and key performance indicators (KPIs) for SaaS companies:
Annual Recurring Revenue (ARR) and Monthly Recurring Revenue (MRR): These figures illustrate the money that is coming in, whether it’s for the year or the month. Investors like to look at MRR, since ARR can sometimes obscure important details. A strong MRR shows a pattern of growth month over month. For SaaS companies, MRR often remains steady, which makes forecasting future revenue a more straightforward process.
Customer Acquisition Cost (CAC): This number shows how much a company spends to acquire a new customer, taking into account sales and marketing efforts. Understanding this figure is central to a profitable business model. The high costs of customer acquisition can sometimes come as a surprise to new companies. The CAC Payback Period is the amount of time needed to recoup the costs of attracting a new customer.
Customer Lifetime Value (CLV): This metric represents the net profit gained from a customer while they remain with your company. Along with CAC, it helps you see if your business can turn a profit compared to how much you have to spend to get customers.
CAC/CLV Ratio: New companies sometimes spend more on customer acquisition than they get back from those customers in the long run. A CLV that is three times as much as your CAC, or a 3:1 ratio, is ideal. If the ratio is less than 3:1, your company needs to figure out how to increase CLV or decrease CAC.
Churn: This metric tracks the number of customers who stop using their subscriptions, whether they cancel or simply don’t renew. It shows how well your product is being received in the market. Investors don’t like to see a high churn, because it lowers revenue and increases customer acquisition costs.
Cash Flow: Cash flow shows where companies are with receivables. SaaS customers typically pay in monthly increments rather than all at once. Since collections are delayed over time, companies can encounter cash flow problems, so keeping an eye on this metric is crucial.
Tracking metrics with Intacct
Intacct offers SaaS companies a Digital Board Book, available with an additional subscription, for tracking metrics and KPIs. Pre-built dashboards can show not only the current numbers but also how the stats compare to the previous time periods. For example, customer churn might be at 1.41 percent, with the dashboard indicating that this is a .33 increase from last month. Or maybe your Customer Acquisition Cost for the quarter is $124,213 and the dashboard shows that’s a decrease of more than $50,000 from last quarter.
Colorful bar graphs, line charts and other graphics present the metrics in a clear and appealing way. These illustrated metrics can be shared with executives and investors to truly tell the story of your company’s performance. Stakeholders get insights that can help them make important decisions quickly. Because Intacct is cloud-based, all numbers are updated in real-time for even more visibility.
As your staff prepares for meetings, they no longer have to spend hours putting together custom presentations. Instead, they can use Intacct’s Digital Board Book to pull together reports in minutes. Intacct’s seamless integration with Salesforce and Salesforce CPQ also allows users to pull in numbers for sales, add-ons and renewals from Salesforce to include in reports.
With Intacct, your company has unparalleled access to the metrics it needs to see a complete picture of its performance. Intacct is scalable, so you’ll be prepared as your company moves through the stages of growth and needs to access additional and more complex metrics.
Want to find out more about how Sage Intacct can help your SaaS company monitor crucial metrics and prepare for growth? Schedule a call with one of the professionals at RSM today.