Customer Growth Metrics
1. Number of Customers:
Manage your customer growth by monitoring and growing the number of your subscribers.
2. Subscriptions Per Customer:
Manage your customer growth by monitoring and growing the number of products subscribed by a single customer account.
3. Customer Lifetime value (CLTV):
CLTV measures the total customer spending throughout the lifespan of a customer, representing all the value you can expect from a customer in the long-run. Customer lifetime offers insight on the value of each additional customer. You can improve CLTV by 1) keeping your existing customers longer (customer lifespan) and/or 2) increasing the spending per customer (customer value).
Customer Lifetime Value (CLTV) = Customer Value * Avg. Customer Lifespan
Avg Customer Lifespan = Sum(number of years as customers for all customers) / (# of customer
Customer Value = Avg. Purchase Value * Avg. Purchase Frequency Rate
Avg Purchase Value = (Total Revenue / year) / (# of Purchase / year)
Avg Purchase Frequency Rate = (# of Purchase / year) / (# of Unique Customer / year)
Revenue Growth Metrics
4. Monthly/Annual Recurring Revenue (MRR/ARR)
MRR/ARR is the total monthly/annually subscription revenue expected from your existing customers. This reflects how much revenue you can expect to make in an on-going basis. You should manage and improve your MRR/ARR for revenue growth.
5. MRR per User or per Account
This reflects how much recurring revenue you receive from each of your customer and account. Monitor the changes of MRR/account over time can help you understand on specific account contributing to your revenue growth.
6. Total Contract Value (TCV)
TCV measures the total value of a customer contract, including both one-time and recurring subscription charges. TCV reflects the contract deal sizes but is null for a subscription without a defined end-date.
7. Annual Contract Value (ACV)
ACV is the annual contract value of a customer subscription agreement, reflecting the annual revenue guaranteed by your customer contract.
8. Deferred Revenue
Deferred revenue is the revenue in the booking that you received but not yet fulfilled the obligation (products/services) from the booking. This reflects the money you received from your customers, but the money cannot be considered as revenue until you provide the service for that revenue.
Bookings is the dollar commitment from deals you closed, usually an annualized number. Bookings is the total amount of money you can expect to get at the end of the day. For example, if you sign a contract of $100K, then you have $100K in your bookings.
Billings is the money you received by your customers during a period (i.e. a quarter). For example, if your $100K contract is paid in four different installments quarterly, then your billings is $25K per quarter for the contract.
11. ACV to Billings Ratio
This is the ratio of how much has been billed to the ACV, evaluating the billing patterns.
12. Customer Acquisition Cost (CAC)
CAC measures the cost to acquire a new customer.
CAC = (Total Sales & Marketing Cost) / (# of Customers Acquired)
13. CLTV to CAC Ratio
This ratio reflects the total average value you anticipate to receive from a new customer over the average cost to acquire a new customer.
CLTV / CAC = the average multiples of return over cost for each additional customer
14. R&D Spending (as % of sales)
This measures the expense of reinvestment in product development for future growth.
15. Marketing Cost (% of ARR)
This measures the % of revenue reinvested in marketing to drive future growth.
16. Sales Cost (% of ARR)
This measures the % of revenue reinvested in sales to drive future growth.
17. Cost to Serve (CTS)
CTS measures the business activities and overhead costs incurred to service a customer, providing insights on the profitability of a customer account.
18. Gross margins
Gross margins is the net sales revenue subtract the cost of goods sold (COGS), representing the amount of sales revenue that the company retains after incurring the direct costs related to producing the goods and service it sells.
Gross Margin = Total Revenue - COGS
COGS = Cost of Support, Service, Customer Success, and Operations.
19. Recurring margins
Recurring margins reflects the recurring profits of your SaaS business
Recurring margins = subscription revenues - recurring COGS
Cash Flow Metrics
20. Operating Cash Flow (OCF)
OCF is the amount of cash your company generates from the revenue, indicating the health and liquidity of your business.
Operating Cash Flow (OCF) = Revenue - Operating Expenses
21. Operation cash flow margins
This is your operating cash flow as a % of your sales in a given period. A high margin indicates efficiency at converting sales to cash.
Operating cash flow margins = (OCF / Sales Revenue) * 100%
22. Months Up-front
This measures your sales performance in receiving up front payments from your customers, contributing to your OCF.
Sales Effectiveness Metrics
23. Growth Efficiency index (GEI)
GEI indicates how much money you spend to acquire additional dollar of new ARR. The lower the GEI, the better.
GEI = (Annual Sales & Marketing Expense) / Net New ARR
Net New ARR = New ARR - Churn ARR = Current Year ARR - Last Year ARR
24. ARR quota per FTE
This indicates the ARR output per Full-time employee (FTE)
ARR quota per FTE = ARR / Number of FTE
25. Customer Renewal Rate
This measures the % of your existing customers choose to renew rather than cancel. The renewal rate reflects your customer loyalty and business sustainability.
26. MRR Renewal Rates
This measures the rate of renewal of MRR from your existing customers.
27. Sales & Marketing Efficiency
This simply measures the efficiency of sales & marketing by calculating the ratio of sales & marketing spending to revenue.
Sales & Marketing Efficiency = Sales & Marketing expense (last quarter) / new ARR (this quarter)
28. CAC by channel
This is the calculation of CAC by the channel(s) used in customer acquisition, providing insights on the efficiency of the various marketing channels.
CAC (channel) = Total Sales & Marketing Cost (channel) / (# of Customers Acquired (channel)
29. Lead Velocity Rate (LVR)
LVR is the % growth of qualified leads month-over-month, reflecting the growth potential of customer pool.
LVR (%)= [(Qualified lead current month - Qualified Lead last month)/(Qualified Lead last month)] x 100
30. Leads-to-trial conversion rate
This measures the ratio of leads to trial, indicating the quality of the leads. The higher the quality of your leads, the better the conversion rate.
Leads-to-trail conversion = Number of Trials in a period of time / Number of Leads Engaged in the period of time
31. ARR/Sales FTEs
This simply divides ARR by the number of Full-time sales in a given period of time, indicating revenue output per sales.
ARR/Sales FTEs = ARR in a period of time / Number of Sales in the period of time
32. Sales Cycle Length
This measures the average time it takes to close a deal.
Sales Cycle length = # of days for all sales combined / # of deals
Number of days for all sales combined = # of days from 1st contact to customer conversion of all deals
33. Trial-to-paying-account conversion rate
This measures the ratio of trials to paying customers, indicating the success of your on-boarding process.
34. Average Contract Length (ACL)
ACL is the average length of all signed customer contracts. A monthly subscription plan has a contact length of 1 month.
ACL = (total committed contracts in months) / Total number of contracts.
35. Subscription Churn
This measures the number of subscribed customers you lose over a period of time.
Subscription Churn = Subscription cancellation in a period / Subscribers at the beginning of the period
36. Net Revenue Churn
Net Revenue Churn measures the % of revenue lost from existing customers over a period of time.
Net Revenue Churn = (Revenue lost in a period - Upsells in a period) / Revenue at the beginning of the period
37. Gross Revenue Churn
Grows Revenue Churn = Revenue lost in a period / Revenue at the beginning of the period
38. Quick Ratio
Quick ratio measures the growth efficiency of your SaaS business. How reliable can you grow revenue given your current churn rate?
Quick Ratio = (New MRR + Expansion MRR) / (Contraction MRR + Churned MRR)
New MRR - MRR from new customers
Expansion MRR - MRR from existing customers (upgrades)
Contraction MRR - Lost MRR from existing customers (downgrades)
Churned MRR - Lost MRR from canceled customers
User Adoption Metrics
39. Net Promoter Score (NPS)
NSP gauges the loyalty of your customers and how likely they would recommend your product/service to others. Surveys are used to determine % of promoters, passives, and detractors.
NPS = % Promoters - % Detractors
40. Volume and Types of Support Tickets
This is the total number of instances raised to support, the types of issues encountered and variety of problems.
41. Products per customers
This indicates number of products that each individual subscriber purchases.
42. Altitude Metric
This indicates the usage of your service.
Altitude metric = (data volume, number of users, computing cycles) / entitlements (monthly revenue)
43. Number of features accessed per customer
This measures the proportion of total features that are used by subscribers.