Software-as-a-service (SaaS) has exploded in popularity in recent years, and it’s a trend that is here to stay, especially when we are talking about SaaS Business. 

The first step is to develop a product either in-house or using a professional service like Redwerk SaaS development services. But because SaaS brands rely on subscriptions to stay afloat, they must track certain metrics to keep their operations running smoothly. Here are five of the most important ones:

1. Customer Churn

With a SaaS business, attracting new customers is important, but it’s equally important to maintain your current customer base. 

Customer churn measures the amount of business lost during a certain time period. It is one of the most crucial metrics in tracking the health of your business. It is inevitable that customers will leave, but tracking your customer churn will help you avoid bigger problems down the road.

If a larger percentage of customers are leaving, you can tweak your strategies and offerings to prevent a complete disaster.

Churn will help you understand your customers – what’s keeping them around and what’s driving them away. It provides insight across a specific time period or date so that you can better pinpoint which factors affected customer churn.

Read More: How to On-Board New Customers the Right Way?

2. Average Return Per Customer

Another important metric to track is the average return per customer and the average revenue that you received from customers.

Understanding your average return per customer will help you find new ways to increase that figure. This can be achieved through cross-sells and up-sells.

  • Up-sells push customers to more expensive tiers or versions of your products.
  • Cross-sells get customers to buy extra features with your products. 

When you understand your average return per customer, you begin implementing systems that steadily increase your revenue and measure whether these systems are a success.  

3. Cost Per Acquisition

Marketing is crucial to the success of SaaS companies, but it’s important to invest in the right channels. Putting too much money into the wrong channels can eat into profits.

Measuring the cost of acquisition for your campaigns will help you keep tabs on your marketing and ensure that you’re investing in the right channels.

To figure out your cost per acquisition:

  • Add up your marketing and sales expenses for the previous month.
  • Divide that total by the number of new customers you acquired during that same period.

The figure should give you an idea of how much you’re spending to acquire new customers.

If you find that you’re spending more than you’re receiving, it’s time to rethink your marketing strategy to overt a financial disaster.

The above example will give you a broad figure, but you will want to figure out the cost per acquisition for each campaign to make sure that you’re on the right track for each marketing channel.

Read More: Objectives & Key Components of Digital Marketing To Consider Right Away!

4. Customer Engagement Score

With a SaaS company, it’s important to focus on maintaining your existing customers. Measuring customer engagement is one way to keep an eye on customer satisfaction and whether or not a customer will churn.

The customer engagement metric may look at several factors, including:

  • How often the customer is logging in.
  • What your software is being used for.

Customers who are logging into the service daily are less likely to cancel because, as their activity shows, your service is a part of their daily routine. 

Your brand’s customer engagement score scale should be unique to your customer base and your software. When creating your scale, consider the factors that will predict customer happiness and keep them around. Analyze the behaviors of your longest-standing customers to get an idea of which factors to include in your scale score.

5. The Sales Funnel

All businesses should be tracking their sales funnels, including Saas companies. If your company offers a free trial or free version of your product, your ultimate goal is to convert those customers to paid plans.

To achieve this goal, you need to track the number of people that move through each stage of your funnel. If you notice that a large percentage of people don’t move past a particular stage, you can analyze that stage and figure out what you need to change to get them through to the next stage. 

SaaS businesses should be tracking these five metrics to ensure their business stays healthy and can expand in the future.