In recent years, the Software-as-a-Service (SaaS) platform has proven to offer several advantages to organisations, compelling many of them to adopt this service. As businesses make this transition, they can benefit from enhanced operational efficiency, reduced expenditure, and better scalability.
Subscription-based applications that are centrally hosted on the cloud are known as Software as a Service (SaaS) platforms. Users can access these platforms over the internet by paying a fee. Instead of buying the complete product and all its features in advance, they can choose to rent the SaaS platform for a specified duration. This arrangement benefits both producers and consumers, offering them a greater value proposition.
Although Software as a Service (SaaS) platforms offer great convenience, managing them can be a complex process, and their performance may be affected by various factors. Therefore, engineering executives, growth managers, and other key personnel must keep a watchful eye on specific Key Performance Indicators (KPIs). This blog post presents nine KPIs that engineering and growth teams should monitor to ensure the success of their SaaS platform.
Net Promoter Score (NPS)
Managers typically use the Net Promoter Score (NPS) as a measure of whether their Software-as-a-Service (SaaS) platform is worth recommending to others, including colleagues, friends, and acquaintances. To calculate an NPS, developers request users to rate the service or product on a specific scale.
A high Net Promoter Score (NPS) implies that the Software as a Service (SaaS) platform is satisfying its customers’ requirements. Conversely, a low NPS score indicates that customers are less likely to endorse the platform to their peers.Monthly Unique Visitors (MUV)
Measuring the total number of visitors who have not previously accessed the platform in the current month is possible through Monthly Unique Visitors (MUV). This Key Performance Indicator (KPI) provides the development team of a Software-as-a-Service (SaaS) platform with comprehensive information about the platform’s entire audience.
Company executives must compare the number of new visitors to the number of existing visitors each month as it is essential to evaluate the effectiveness of any marketing activities. The number of unique visitors directly reflects the success of these initiatives.Customer Acquisition Cost (CAC)
Businesses benefit from utilising the Customer Acquisition Cost (CAC) to assess their return on investment and profit. CAC is the total expenditure incurred for acquiring a new customer, such as sales and marketing costs, wages, commissions, tools, and other related services. To calculate CAC, businesses should sum up the total expenses on their sales and marketing channels and divide this amount by the number of new customers they have gained. This metric helps businesses to better comprehend their net earnings and profits accurately.Average Revenue Per User (ARPU)
The Average Revenue Per User (ARPU) is a crucial Key Performance Indicator (KPI) for SaaS platforms that provides valuable insight into their performance. To calculate ARPU, divide the total revenue earned by the total number of active users during a specific period. It is important to compute the ARPU separately for new users and existing customers to obtain a more accurate assessment of the platform’s pricing. Product managers must monitor and regulate SaaS pricing using ARPU on a monthly, quarterly, or annual basis, as it is key to determining the correct price.Customer Lifetime Value (CLV)
Calculating the Customer Lifetime Value (CLV) for each customer involves adding up all of their purchases made throughout their subscription to the SaaS service. To obtain a more accurate CLV, businesses must divide the Average Revenue Per User (ARPU) by the Churn Rate.
Customer Lifetime Value (CLV) is a significant Key Performance Indicator (KPI) for Software-as-a-Service (SaaS) businesses. It provides a better understanding of the value each customer brings to the company and how long they use the platform. By analysing this KPI, businesses can effectively manage their income, pricing strategies, and individual customers’ overall contribution.Monthly Recurring Revenue (MRR)
Monthly Recurring Revenue (MRR) refers to the expected profits that a Software as a Service (SaaS) platform will generate in a given month. It can be obtained by combining the revenue obtained from all customers during that month. There are two types of MRR: Expansion MRR and Churn MRR. Expansion MRR is the income earned from new customers and those who have upgraded their plans, while Churn MRR represents the revenue lost due to customers downgrading or discontinuing their use of the SaaS platform.
Monthly Recurring Revenue (MRR) and its variations are some of the most vital performance indicators for Software-as-a-Service (SaaS) businesses. This key performance indicator helps businesses accurately track their revenue, profit growth, and losses over time. Additionally, MRR accounts for changes in the SaaS product, services, and marketing techniques.Churn Rate
Retaining existing customers is more cost-effective than acquiring new ones, making it crucial to keep track of the number of customers who discontinue their subscription to the Software as a Service (SaaS) platform. This number is known as the churn rate, and having a low churn rate is essential for the success of any SaaS business. A churn rate of 5-7 percent annually is deemed acceptable; however, a rate that exceeds this percentage could have a negative impact on the SaaS business’s performance.Cash Burn Rate (CBR)
The Cash Burn Rate (CBR) provides a comprehensive overview of all the expenses related to managing the Software as a Service (SaaS) platform. It is crucial to consider all costs when calculating the CBR, including expenses for advertising campaigns, marketing initiatives, staff salaries, and other operational costs.
Businesses can calculate their Cash Burn Rate (CBR) for a specific period, such as a month, quarter, or year. CBR measures the amount of cash leaving the company. To ensure a positive net profit, the finance and sales departments must analyse and compare the Monthly Recurring Revenue (MRR) and CBR.Number of developers employed
To ensure the efficient operation of any SaaS platform, it is critical to have a team of highly skilled developers. Businesses must monitor the number of developers working on the project, their efficacy, and their ability to troubleshoot any issues to maximise performance. This team may consist of multiple coders, Site Reliability Engineers (SREs), DevOps professionals, and other developers with the requisite skillset to work on SaaS applications.
The number of developers on a business’s team illustrates the size of the company. A substantial development team indicates that the Software-as-a-Service (SaaS) platform is operating at an optimal level. It is crucial to recruit proficient engineers to function as product managers for your SaaS platform.
Therefore, how can you ensure the success of your SaaS platform?
Engineering leaders must ensure the successful operation of a SaaS company by closely monitoring key performance indicators (KPIs). This requires employing effective techniques and ensuring that they are correctly implemented throughout the SaaS development process. It is also important to build an efficient development team that can work with the sales, finance, administration, and marketing departments to ensure the smooth running of the SaaS company.
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