SaaS Metrics - Operations, Finance - Part 2

Here are SaaS operations and finance metrics which I used in the past and continue to use. This part covers operations which comprises customer onboarding, product adoption, support, services, NPS and so on. Operations is one of the major aspects of customer satisfaction which is directly correlated to revenue and retention. Please refer to part 1 of this which mentions the Customer acquisition and retention metrics. 

Finance covers the financial engineering of the saas business. As I have mentioned in some of my posts that operations and finance is a very delicate balance which needs to be maintained as a healthy, sustainable business … 🏍️ 

This article assumes that you know what SaaS is and are aware of preliminary metrics around a business. All the metrics are inter-related to each other and create a cumulative impact on the SaaS business. 

Operations - 

• Time/ touch points to onboard customers - Assume a customer signs today; good news. This metric tells how many days it took the customer to get onboarded. It is also important to track how many team members/ departments they touched (email, tool, etc.) before completing the onboarding. Lesser the better. Year over year we should target to reduce this metric. 

• Product Adoption metrics - Once the customer is onboarded, all of the users from that customer should be onboarded as soon as they can. Product adoption is considered to be users completing their tasks, transaction and reaching to the expected value. This is directly correlated to the ROI the customer gets quarter over quarter … 🥇 

• Time to value - It is important that each user in the customer reaches the value as soon as they can. The sooner each user reaches the value (key use cases), higher the user stickiness and higher the customer lock in.   

• Components heat-map - As the product scales it is expected that all customers have purchased all of the components. If this does not happen, it is easier for the customer to move to another SaaS product as they may not realise the full value. 

• Net Promoter Score (NPS) - A survey can be sent to the buyers/ customers with questions and based on the responses an NPS is calculated. Higher the NPS, more satisfied are the customers and NPS is directly correlated to future revenue … 🏆 

• Service Revenue (% of ARR) - If there is an adjacent service offered to the customer then it helps to understand what is the customer appetite for services. 

Before moving to Finance, here is a refresher quote -

“Good friends, good books, and a sleepy conscience: this is the ideal life.”

― Mark Twain

Finance - 

• CAC, CAC payback - If customer acquisition cost is 100 dollars then how many months it takes to get 100 dollars back from the customer is CAC payback. Lesser the payback better is the business … 🙋 

• Rule of 40 - Add the revenue growth (%) to the profit margin (%) and the total should be more than 40. If this number is more than 40 then the business is considered to be healthy. 

• Revenue/ FTE - Divide the ARR by number of employees. Higher this number, more efficient is the SaaS business. 

• Revenue Generated to new spend - this is referred to as a burn ratio and is a growth metric. Example - if for the year new spend is 1 dollar then how many dollars of new revenue is generated with 1 dollar of spend … 📢 

• Committed ARR - To reach this number, multiply ARR of all customers with their contract length in years. SaaS businesses should do 2 to 5 years of contracts to build better revenue forecasting, business stability and innovation. The longer the contract, the higher are the chances that the SaaS business will continue to innovate. 

Please note that - 

• Product adoption metrics are usually very broad as we can track each and every translation. I will surely write more about product adoption soon … 💰 

• In these two parts I have bucketed the SaaS metrics which made sense to me. There can be other ways to bucket these as well.  

• Start with the metrics that exist. It is not mandatory to set up weekly automations for these metrics. 

• I have not given benchmarks for each; they exist on the internet or ask GPT engines. 

This is my list based on my experience. I am open to suggestions. 

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Swagat Irsale is a Growth and Scale Advocate. He works with start ups and scale ups and helps them grow revenue and build enterprise products which users use.

Connect with him for work, partner opportunities. 

https://www.groadv.com/post/grow-revenue-the-journey-zero-to-one-billion-swagat-irsale

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