SaaS Reporting Guide: Cohort Analysis, Sales Metrics, CAC & More
11.08.2022 – Ryan Erwin
SaaS Reporting Guide: Cohort Analysis, Sales Metrics, CAC & More
It’s essential to closely monitor the performance of your SaaS organization and evaluate if it’s performing well. This sector has made significant strides within the past few years making it one of the most developed industries that you can easily invest in. According to researchers, the SaaS industry has recorded a growth rate of 500% within the past seven years. When evaluating the growth of your SaaS business, you will realize that there are a lot of calculations you need to make before concluding.
This is where many people go wrong since many sales metrics need to be analyzed keenly to identify your business’s success over the period. Also, you need to learn about cohort analysis to be better positioned to identify the strengths and weaknesses of your brand. Given that there are lots of calculations, most individuals fear getting involved since they consider everything associated with calculations difficult.
However, you don’t need to do these calculations using the manual format since there are computers that can help you get the job done. All you need to do is ensure you know the exact calculations you need to focus on. Do you experience challenges when evaluating your SaaS company performance? This SaaS reporting guide can help you get answers to your questions!
Cohort Analysis SaaS
The SaaS cohort analysis is mainly used when you have plans to target on some specific problematic points within the lifecycle of your customers. Rather than spending a lot of your time analyzing other irrelevant features, cohort analysis offers a more expansive room that gives you more freedom to analyze data from different points using different charts such as scatter plot chart, dot plot chart, and sankey chart. A cohort refers to grouping customers depending on stipulated criteria to outline the available similarities and differences.
For instance, you can opt to make groups depending on the time they signed up. Doing this gives you the freedom to identify the custom churn rate enabling you to identify the best way forward that can enable you to mitigate the situation and reduce the churn rate to ensure that your business is operating on balanced grounds. When conducting cohort analysis, you will realize that the churn rate is mostly high during the fast months within customers’ lifecycle.
This means that you have an opportunity to identify the reasons why customers are leaving during the fast months of interacting with your company. Fixing such problems enables your business brand to attract more potential customers and retain them in the long run, thus increasing revenue generation.
SaaS Sales Metrics
When creating your SaaS report, you cannot avoid the application of the sales metrics. These metrics are essential to help your team members understand the strides made by their efforts in terms of business development. Also, it enables you to understand more about your customers and their interests. When evaluating the sales metrics, you need to learn about a series of metrics. Let’s look at some of these metrics!
The Customer Churn Rate and the Revenue Churn Rate
If you look at these metrics using the normal eye, they may appear as if they are used to measure the same thing. However, the truth is that the total number of customers you lose within a particular period is translated to the amount of revenue you lose within the same period. Note that the customer churn rate reflects the total number of customers who opt to downgrade or cancel their subscription involuntarily due to either missed payments or failed payments.
When you want to calculate the customer churn rate in your SaaS company, you need to find out the total number of subscribers you had on your list at the start. Remember that these metrics are calculated within a month. This means that you need to consider using thirty days in your calculations. The next step is subtracting the number of subscribers you had at the beginning from the number you have at the end.
Once you have the answer with you, divide it with the total number of subscribers you had in the beginning. The other essential sales metrics is the average revenue per customer, which is also known as ARPU. This metric enables you to identify the amount of revenue you can generate from every customer. The metric helps the business owner understand their customers’ spending habits, giving them an idea of how much they are likely to spend purchasing products and services from the SaaS company.
SaaS Conversion Rate
You cannot miss mentioning the SaaS conversion rate when analyzing the SaaS metrics. This refers to how your site has been tailored to convince customers to purchase from you. This metric can also be applied to help you understand more about the efficacy of your customers’ products and services. In addition, you can learn more about the value you are offering to your buyers and the entire industry in general.
This feature can also help you identify the best pricing that you can impose on your products and services. There are several SaaS conversion rate features that you need to learn more about. Let’s outline them!
Base Conversion Rate
You can easily find your SaaS conversion rate using Google analytics and custom reports created by excel charts, but you can as well choose the manual approach and get the job done. When calculating the conversion rate at a higher level, you can take the number of website visitors and divide it by the number of conversions that have been recorded within a certain duration. If you do this right, you will have the general conversion rate you can incorporate in your data report.
Lead to Sale Conversion Rate
This works in a manner that the SaaS marketing team is focused on generating leads for the business. The team spends most of their time filling lead forms on the company site, content marketing, and social media. Once the leads are obtained, the respective department goes ahead to filter the leads using an automated system to avoid wastage of time. They are then entered into the sales conversion rate to analyze their effectiveness.
The simplest way to calculate this aspect is to take the number of new visitors within a certain duration and divide it by the number of leads you have generated within the same duration.
It’s automatic that you will always want to know more about the source of your leads. You can easily track the source of your leads using tools such as Google analytics or Ahrefs. Tracking the general source of your leads will help you understand if the leads are coming from organic search, social media, or advertising like display ads, search ads, and video ads. After identifying the numbers operating behind your leads, you can utilize the same lead when scaling up the conversion rate and identify the main source of the leads.
Remember that you can acquire and use automated tools that can help you scale the source of the leads without having to do the manual work to find the answers to your riddle.
Customers Acquisition Cost
When running any business, you need to ensure that you know the customer acquisition cost also known as CAC. The formula to find the CAC is simple. You simply need to take the total sakestand marketing spend and divide it by the number of customers acquired, and you will have the right answer. Also, there are other calculations revolving around CC that you need to know. They include:
CAC Payback Period
This is the time it takes to generate revenue that can cover the cost of acquiring the customers. To calculate the payback period, you divide the CAV by the average MRR and multiply the results by the gross margin percentage.
This is the general calculation of your business revenue without the cost of the business operations across all the company departments.
When running a SaaS business, you need to understand that reporting based on the key metrics is essential to ensure that your company remains profitable in the long run. Remember that 64% of SaaS companies are operating remotely. This means you should also adopt the ongoing trend within the industry to ensure that you offer value to your customers. Before making any important move within the industry, begin by conducting thorough research to get a glimpse of the impact you intend to make and how it will impact the success of your SaaS company.