I have discussed in the past the past the benefits of SaaS and specifically recurring revenue model. The main benefit of the recurring revenue model is the predictability of revenue, customer acquisition payback, customer lifetime value (CLTV), and the ability to optimize Sales & Marketing spend accordingly. But in order to truly benefit from a recurring revenue model you need to ‘speak’ SaaS. The numbers and KPI that a SaaS company measures should be things like MRR, CMRR (committed MRR), average ACV (Annual contract Value), gross churn, net churn, CAC payback period etc. Too often do I see companies that have a recurring revenue model yet still measure bookings and billings instead of common SaaS metrics.
There are hundreds of blog posts out there about SaaS and the metrics you should measure. If you have a recurring revenue business you MUST know it by heart. It reflects poorly when investors see a subscription-based company that still uses traditional, on-premise metrics to measure performance. Bessemer’s 10 laws of cloud computing is a quick and easy read about SaaS and the metrics you should measure, but there are also many others out there.
Since I often get asked what should be in a ‘standard’ SaaS reporting template, I decided to publish a template which some of our SaaS companies use. Needless to say, each company is unique and management should focus on different things based on what is most important for the business. For example, If you have a freemium model, you should measure conversion from free accounts to paid, if you have a land-and-expand model you should focus on revenue expansion KPIs, and services which have long deployment cycles should measure CMRR conversion to MRR. But it is often helpful to have somewhere to start from and this template is intended exactly for that.
You can download the template in Excel format here: SaaS metrics template.
I am going to publish a few follow on posts on some of the smaller nuances in SaaS reporting like what assumptions go into CLTV, or based on what period should the CAC payback be calculated, or when should you measure CMRR vs. MRR. But using the common SaaS language and tracking the common SaaS metrics is the first step to any successful SaaS business and if you are using this template you are already half way there.