Running a SaaS business is a lot like hunting.
If you want to succeed, you have to become a master tracker.
You need to be able to pick up on the smallest details that other people would miss.
You must know how to focus on tracking the right things so that you are able to find your prey.
Except with business, you aren’t creeping through the forest with a rifle, silently following hoof prints for hours on end to bag your dinner.
You are tracking key metrics of your business so that you can bag massive amounts of revenue.
Think of these metrics as a scorecard for your business.
They will tell you what you can improve, where you are doing well, and what steps you need to take to quickly grow your business and increase your revenue.
By consistently testing different aspects of your business and tracking these metrics you will be able to growth hack your business and achieve your goals faster than you thought possible.
Sound like something you might be interested in?
I thought so.
1. Unique Visitors
If you have been around the proverbial block as an online entrepreneur then you have inevitably heard that most traffic metrics shouldn’t be bothered with.
You have been told that they are nothing more than vanity metrics, meant to stoke the egos of entrepreneurs with big websites.
And to an extent, this is correct.
General visitor/traffic measurements do not help you to understand the quality or value of the traffic that you are receiving.
However, unique visitors/traffic is another story.
While unique traffic isn’t that far removed from the realm of vanity metrics, tracking your unique visitors is a great way to assess the accessibility of your site and the sources of your traffic.
There is no need to obsess over your unique visitors, but checking them on a regular basis will provide valuable feedback for your marketing team.
2. Leads…Qualified Leads
If you are looking to fully optimize your company’s marketing department then tracking your leads and qualified leads is one of the most important things that you can do.
However, you first need to fully comprehend the difference between a lead and a qualified lead.
I define a “lead” as anyone who has expressed interest in your company but not taken the first step towards making a purchase.
A qualified lead, on the other hand, has already made it into your sales funnel.
For SaaS, this typically means that a qualified lead will be experimenting with a trial or product demo.
Now that you understand the difference, it is important that you start to track lead and qualified lead generation on a very regular basis.
The numbers will give you a good idea of how well your marketing campaigns are performing and will let you know when you need to change your focus.
3. Customer Acquisition Cost
Customer acquisition cost or CAC is an essential metric to track whether you are operating a SaaS business or not.
To calculate your CAC tally up all of your sales and marketing expenditures over a given period of time and divide them by the number of new customers you had in that period.
So for example, let’s say that you spend $250,000 on sales and marketing in the month of September and you generated 500 new customers.
This would mean that you CAC is $500.
Whenever you are making your calculations, make sure that you are taking all costs into account.
This includes the salary and benefits of your sales and marketing employees and any outside consultants you hired.
This knowledge is incredibly valuable because it allows you to determine the rough sales and marketing budget you will need to generate a certain number of customers.
4. The Ratio of Lifetime Value of A customer To CAC
The ratio of the customer lifetime value (or CLV) and CAC is one of the single most important metrics that you can track.
This metric is an excellent gauge of your business’s health, longevity, and potential growth.
As an added benefit, it basically summarizes your anticipated revenue, churn, sales and marketing expenditures with one beautifully simple number.
If this number is too low, you either need to increase the prices of your products or trim the fat in your marketing department.
But how low is too low?
Well, most business experts agree that the ideal ratio for a healthy, growing business is at least 3:1.
This means that if your CAC is $500, then your customer lifetime value should be a minimum of $1,500.
If your ratio is higher than 3:1, great!
This means you need to start dumping more money into your sales and marketing departments and further expanding your sales engine.
Customer churn is the most disheartening yet possibly the most important metric on this entire list.
I know that a lot of you might think that this is a customer service metric, but I firmly believe that your churn rate applies to every single aspect of your business.
In essence, your churn rate tells you how much business you are losing within a set period of time.
Here’s how you measure it.
Let’s say you started out this month with 1,000 total customers.
Over the course of the month, you had 50 cancellations or customer losses.
This means that your churn rate would be 50/1000 or 5%.
When you compare this metric with the number of new customers that you are generating each month (more on that below) you can have an accurate picture of your company’s health.
For example, if you have 1,000 customers, a churn rate of 10%, and you are only generating 50 new customers a month, you know that something needs to change.
However, if you have 1,000 customers, a churn rate of 5% and are generating over 100 new customers a month, then it’s pretty safe to say that your business is on the right track.
6. New Customers
This metric is as simple as they come.
There are no calculations or other difficult mathematical equations needed here.
All you need to know is how many new customers signed up for your product or service in the last week, month, or year?
While there are other metrics that serve as a greater indicator of the overall success of your business, the number of new customers you acquire on a monthly basis is still valuable.
7. Revenue And Expenses
This is pretty straightforward.
You need to track how much money is coming into your business each month and how much money is leaving.
Make sure that you track your monthly recurring revenue, annual recurring revenue, and revenue per account.
Once you have run the numbers, figure out your company’s total expenditures and you will have a very clear picture of your business’s financial well being.
This will help you to develop a more comprehensive budget for your sales and marketing campaigns once you pair it with some of the other metrics on this list.
8. Gross Margin
While gross margin is technically a financial metric and not a marketing metric it still plays a pivotal role in growth hacking your business and improving your marketing efforts.
Calculating your gross margin will help you determine how you should price your products which will determine the angles that you take with your marketing and sales campaigns.
Your gross margin is simply the amount of revenue your company still has once you have subtracted the costs of delivering a product or service.
Or to put it mathematically.
Gross margin (Ratio) = Revenue – Cost of Goods or Services/Revenue
So let’s say that your company sold $1,000,000 worth of its software last month.
However, the cost of manufacturing and installing the software for your clients cost $400,000.
This means that your gross margin is $1,000,000 – ($400,000/$1,000,000) = 0.6 or 60%.
9. Unique Visitor to Qualified Lead Rate
This is a fantastic metric to track for optimizing your conversion rates.
You see, you can have thousands or even millions of unique visitors coming to your site each and every month.
But if those visitors are not converting into qualified leads, then your business is doomed.
By tracking the ratio of unique visitors to qualified leads, you will be able to A/B test different variables that affect conversion rates.
You can dial in exactly which lead magnets you should be using, which blog articles you should be writing, and all sorts of other conversion optimization goodies.
10. Qualified Lead to Customer Ratio
The final metric that you need to be tracking is your qualified lead to customer rate.
Similar to the last metric, the qualified lead to customer ratio will provide you with invaluable information for optimizing your sales and marketing process.
For example, let’s say you notice that you are generating a lot of qualified leads who are testing out your product, but you are only 2 in every ten become customers.
This can give you a few clues as to what you need to change in order to improve your conversion rates.
Perhaps the test version of your product doesn’t have enough of the features contained in the full version.
Maybe you are over pricing your product for what you are offering.
Or maybe you just need to revisit your product and ensure that you are actually providing something people genuinely want and need.
Whatever the case, regularly measuring this ratio will give you the necessary knowledge to optimize your sales funnels.
There is a famous quote from business guru Peter F. Drucker that says “What gets measured gets managed.”
And it couldn’t be more true.
If you really want to take your business to the next level, grow your revenue, and become a master marketer, then you must track the above metrics.
No matter how well your business is doing now, tracking the above metrics while simultaneously running tests on your marketing campaigns will sky rocket your growth.
You will be able to optimize every aspect of your marketing and achieve an ROI you never knew was possible.
So, what are you waiting for?
Put on your camo jacket, slip on your boots, grab your laptop and get tracking!
Which of the above marketing metrics have you tracked in the past? What were the results of your tracking?