SaaS KPIs You Should Be Reporting (But Probably Aren’t)

The SaaS industry may be known for its fast-paced and dynamic environment, but just like any other business that wants to stay relevant, Software-as-a-Service (SaaS) companies need to track the kinds of metrics that have an impact not only to their bottom line, but in a number of other ways as well. While Annual Recurring Revenue (ARR) and Customer Acquisition Cost (CAC) are probably the two most well-known KPIs, other advanced metrics can provide deeper insights into a SaaS company's performance.

Limitations of Traditional SaaS Metrics

You can sit in any boardroom or team meeting, and the conversation will be the same: “Let’s track KPIs that matter for our company.” Sure, ARR and CAC are essential metrics for any SaaS business. ARR provides a snapshot of a company's recurring revenue, while CAC helps determine the cost of acquiring new customers. However, these metrics have limitations. ARR does not account for changes in revenue due to expansions or decreases in business, and CAC doesn't consider the long-term value of a customer beyond the dollar cost of acquisition.

Advanced SaaS Metrics to Track

To get a more comprehensive understanding of their business, SaaS companies should consider tracking advanced metrics. These include the following:

• Expansion Revenue: This metric measures the incremental revenue generated from existing customers through upsells, cross-sells, or other means. Expansion revenue is a key indicator of a company's ability to grow its customer relationships and increase average revenue per user, or ARPU, a critical metric for SaaS companies.
• Net Dollar Retention (NDR): NDR measures the percentage of revenue retained from existing customers over a given period, taking into account growth and scaling back. A high NDR indicates that a company is successfully
  retaining and growing its customer base.
• Product adoption: is crucial for SaaS companies, as it directly impacts customer satisfaction and retention. This metric measures the percentage of new users who actively engage with the product and its features within a specific timeframe, indicating how effectively users are finding value and integrating the product into their workflows. It's typically calculated as the number of new active users divided by the total number of new signups, expressed as a percentage. However, this metric can be difficult to calculate and may vary significantly depending on the type of SaaS organization. Product adoption can encompass various sub-metrics such as feature adoption rates, user engagement levels, and time-to-value measurements.

How Solver Can Help

Accurate and nimble forecasting can be make-or-break a scaling SaaS business. Agile budgeting tools such as Solver’s xFP&A solution suite with its SaaS metrics dashboard provide the insights needed to make business decisions based on facts and statistical probabilities—not guesswork. A flexible budgeting and forecasting solution such as Solver is designed to grow with your SaaS business as you add features, adjust pricing, and adapt to changes in the market, providing real-time insight and analysis across every aspect of your business.

Solver is designed to help SaaS organizations manage and monitor their key performance indicators (KPIs), where they can manage SaaS performance reporting, human capital analysis, driver-based planning, budgeting, scenario planning, and forecasting processes more efficiently and effectively across the entire organization. With Solver xFP&A, SaaS businesses can gain actionable insights needed for growth, ensuring the smooth and uninterrupted service on which clients rely.

With a focus on KPIs, Solver can do the following:

• Adjust to Operations & Business Goals: Solver's highly configurable platform allows companies to create custom data fields, KPIs, financial reports, budgets, subscription analysis, and dashboards that reflect their unique products, services, and goals.
• Drive Data-Informed Decisions: Solver provides insights that enable businesses to make informed decisions based on facts and statistical probabilities. By analyzing business performance and market trends, companies can make smarter choices.
• Enable Proactive & Adaptive Planning: Solver's forecasting capabilities empower businesses to plan for multiple future possibilities. Automated data integration and multiple budget iterations allow companies to quickly adjust to changes in the market.

SaaS businesses also face unique challenges with subscription-based pricing models and recurring revenue streams. Solver is built to take on these planning and reporting challenges: 

• Churn: Organizations must keep users happy and informed about products, while building trust to prevent churn. It's not always easy to predict and measure churn rates accurately.

• Subscription Model: Managing your recurring revenue properly provides predictability and stability and helps you succeed with long-term planning and forecasting.

• Pricing: Determining the cost of SaaS products can be difficult due to various factors, including the cost of delivering the service, the value provided to customers, and the competitive landscape.

Putting Business Ideas into Action

While traditional SaaS metrics like ARR and CAC are essential, they don't provide a complete picture of a company's performance. By tracking advanced metrics such as expansion revenue, NDR, and product adoption, SaaS businesses can gain deeper insights into their operations and make more informed decisions. Solver's CPM software is designed to help companies track and analyze these metrics, enabling them to drive growth, profitability, and success in the competitive SaaS landscape.