April 21, 2023
Software as a Service (SaaS) reporting is the process of gathering, analyzing, and managing key data your business needs to thrive.
As a business leader, you understand the importance of metrics and key performance indicators (KPIs). However, the right combination of reports can give you much greater insight than the simple cost of goods and services (COGS), flow-through, and cash flow numbers.
And as a SaaS provider, you also know that your business model is more complex than the traditional product model, and your reporting should reflect that difference. Even self-service, cloud-based methods are better than nothing. That’s where SaaS reporting comes in.
In this article, we’ll cover the benefits of SaaS reporting and what metrics you should be tracking (if you’re not already!).
We are living in the information age, and data-driven analytics power insightful business decisions at a rate unseen in previous eras. If you’re not already implementing SaaS reporting tools, your business could be missing out on some actionable insights that maximize performance, including:
Data analytics tools and reporting software, offer you an improved view of your business. This business intelligence allows you to make informed decisions that translate into success.
You already know that monitoring metrics, like gross margin, is essential to the success of your organization. However, adding these SaaS metrics can help you and your salesforce identify areas of opportunity, allowing you to make real-time adjustments.
One of the most important metrics SaaS businesses should be tracking is customer churn rate. Churn is a powerful indicator of poor customer service, product issues, or pricing flaws. You can calculate churn by dividing the number of customers lost during any period by the total number of customers at the beginning of that period, then multiplying by 100.
By levering this key SaaS metric, you can anticipate issues before they take a damaging toll on your revenue. Additionally, you can use churn to evaluate how effective your retention methods are and where you can make improvements.
As the name suggests, customer acquisition cost, or CAC, is how much it costs to acquire new customers. It is a simple formula where you divide the amount spent in marketing by the number of customers you receive per specific acquisition channel.
CAC is a valuable SaaS metric to monitor because you can combine it with other KPIs, like lifetime value (LTV), and create a CAC:LTV ratio that allows you to identify the most effective marketing strategies. You can also use CAC to set performance benchmarks for sales teams and identify underperforming acquisition channels.
Customer lifetime value (CLV or LTV) is the other side of the customer acquisition coin. It puts a value on the business each customer brings your SaaS company and helps you isolate the high-value customers, allowing you to focus marketing and acquisition efforts on that specific market.
You can manually calculate CLV by multiplying the value of each sale by the number of repeat transactions times the average retention length.
Customer conversion rate is another helpful metric you should implement in your analysis. This metric allows you to see how many potential customers are performing a specific action, such as sign-up for a subscription-based newsletter.
Customer conversion rate is available through Google Analytics. However, to maximize functionality, you need a tool that allows you to ditch the Excel spreadsheets and allows you to view custom reports on interactive dashboards. That tool is Facta.
As a SaaS business, you probably operate under a subscription-based model that relies on monthly recurring revenue (MRR) and annual recurring revenue (ARR). The ability to predict the amount of revenue you have on a monthly or yearly basis is essential in accounting, budgeting, and finance, especially for startups.
Although it won’t provide you with the actual revenue you receive, as clients can cancel, it can give you an idea of your overall moment as an organization. To calculate MRR or ARR, multiply the number of monthly or annual subscribers by the average revenue per user (ARPU).
Last but certainly not least, we have average revenue per user. ARPU is the amount of revenue you make on average per user, and you calculate it as such. It’s your total revenue divided by the total number of users.
By using ARPU, you can evaluate the effectiveness of acquisition channels and marketing efforts. Low overall ARPU, when combined with low LTV, signals low-quality customers, as the opposite will indicate high-quality customers worthy of additional marketing focus.
Information is power, but if you’re not tracking the right metrics, you could be leaving precious revenue on the table. Put information to work for you by including new reports, like customer acquisition costs or MRR and ARR.
While it may be tempting to download the first SaaS analytics dashboard you find, there is a better way to evaluate KPIs that integrates with contract management. Facta allows you to track the SaaS metrics most impactful for informed business decisions, and we support businesses of all sizes. Try our platform and see the difference detailed insights can provide!