Startup Growth Academy #7: Know Your SaaS Early Growth Metrics Inside Out
Numbers can be overwhelming. But don’t give up – get on top of your growth metrics early so you can predict your future performance. Check out the most important growth SaaS metrics for your startup with Startup Growth Academy!
What are the critical metrics for a SaaS startup? Where and how do we start? These are perfect questions for ChartMogul – advanced subscription analytics. Ed Shelley shared with us how to understand Monthly Recurring Revenue and Customer Churn Rate per Customer Cohort. This article and slide deck will help you to focus on what’s important in growth SaaS metrics.
3 – Choose wisely. Having bazillions of growth metrics doesn’t mean you’re doing it right. Start with the key metrics you can measure in an early-life SaaS company, and learn how you can interpret them for your benefit.
6 – Here is an MRR chart displaying month-by-month MRR growth (source: chartmogul.com). If you have a mixture of monthly, quarterly and annual subscriptions, it’s important to normalize these different revenues down to a single month when calculating MRR.
7 – On the surface, MRR gives you a good high-level overview of your business’s revenue growth, but it also helps to look further into the different types of MRR that make up this overall value.
8 – We can distinguish the following:
- New Business MRR. This is the MRR when a lead converts into a paying customer for the first time. This represents new revenue entering your business.
- Expansion MRR. This is when an existing customer’s input in MRR increases in some way, usually due to account upgrades, adding a second subscription or even expiring discounts.
- Contraction MRR. The reverse of Expansion MRR, this measures any decrease in MRR from a customer due to downgrades, reduced quantity or adding discounts. Cancelled customers do not contribute to contraction MRR.
- Churn MRR. This represents the loss in MRR from a customer cancelling (or failing to renew) their subscription when they don’t have any other existing subscriptions.
- Reactivation MRR. When a previously-churned customer moves back onto a paid plan, this initial revenue is considered Reactivation MRR.
11 – Many early SaaS efforts are focused on Customer Success and “hand-holding” the customer through their lifetime with your product. Performing a Cohort Analysis of MRR Churn can be extremely valuable in helping to identify specific months in the customer’s lifetime where customers are churning. Focus your Customer Success efforts here. Doing this will help to plug significant “holes” in your product where you’re losing customers.
12 – Find your “Risk Months” using Cohort Analysis, and talk to customers at this point in their subscription. Understand why the churn exists, and fix it.