Learn how to make the most of your SaaS metrics with Baremetrics Head of Growth, Corey Haines.
For SaaS founders, gathering a wealth of data is often the easy part. What’s harder is knowing how to use it.
Corey Haines is the Head of Growth at Baremetrics, the fast-growing SaaS analytics and insights platform. Having consulted with hundreds of founders on how to best leverage the metrics it provides, Haines shares a few handy shortcuts on how to make the most of the metrics you see and steer your startup in the right direction.
SaaS metrics are only valuable if you know how to use them. Learn how to slice and dice your metrics and discover where you need to take action.
Check out the full event here as Corey breaks down the most important metrics every SaaS founder needs to master — and tips on how to leverage them — including:
- Monthly Recurring Revenue
- Quick Ratio
- Churn Rate
- Learn Conversion Rate
- Average Revenue Per User
“Analytics are only as useful as what you can take action on,” says Haines. “With many of the metrics, there’s a lot to actually look into so you can figure out what to do with the information.”
In SaaS startups, your most important metrics tend to correspond with different points in the sales funnel, the financial picture of your business, and ways to optimize both. Your MRR, or monthly recurring revenue, is one of the most important focal points of a founder’s dashboard. A related metric, quick ratio, offers a snapshot into the overall health of your balance sheet.
“The quick ratio basically compares all of your positive MRR inputs to your negative MRR inputs,” Haines explains. “It usually gives you a number of between about 0.5 and 5.0. If you’re at 1.0, that means that your expansion and contraction is basically equal. If you’re below 1.0, that means the business is contracting — and that’s not a good thing.”
From there, you can dig down to try and identify the causes of the quick ratio.
For a SaaS founder, the churn rate is a metric you’ll want to keep up with constantly. That will tell you how many customers are — and are not — returning to the product, and point to adjustments you may have to make.
“I‘d look at lead conversion rate, MRR, churn and average revenue per user, because that’ll kind of give you a full breadth of the funnel,” Haines says. “How well are we turning interested people into customers, and what are we doing with these customers? What is the book of business worth, and how well are we retaining these customers?”
Those fundamental metrics, and a handful of others, will open up insight into where you and your team can improve. Lead conversion rate, for example, may give you a glimpse into how effective your marketing communications are. Baremetrics plugs into Stripe, Braintree, Recurly, Google Play, App Store Connect and a variety of other providers, and breaks down a wide range of metrics: New subscriptions, reactivations, trial conversion rate, cash flow and much more.
It’s just as easy to get distracted by metrics that appear more important than they are, or that aren’t totally relevant to the currency lifecycle of your SaaS startup.
“There are a few popular ones that can get sort of overblown or overinflated. One of those is lifetime value,” he adds. “What happens, especially with a SaaS business, is that the metric itself is just a function of your average revenue per customer and your churn rate, both of which are moving numbers. So your lifetime value is going to fluctuate depending on how well each one of those is doing.”
“Lifetime value is often used to quantify how much your startup should spend on acquiring a customers — but it isn’t always a good reflection of what you should take action on day to day, because it moves so quickly based on a number of inputs. Average revenue per customer weighted against customer acquisition costs is a much more useful metric in many cases,” according to Haines.“If your customer churn is higher than your revenue churn, then you know that it's probably from your smaller accounts or some customers who are paying you less.” - @coreyhainesco Click To Tweet
Ideally, SaaS metrics highlight specific ways of steering your startup towards longer-term gains — if you know how to properly interpret what you’re presented with, and what it means for your customer base.
“If your customer churn is higher than your revenue churn, then you know that it’s probably from your smaller accounts or some customers who are paying you less,” Haines says. “That can tell you that you have a changing customer base, and that your smaller customers are less fit for the product. But in general, what you want to see is consistent expansion over time.”