Fast-growing SaaS companies are on a mission to scale accounting and reporting processes. For the most competitive of SaaS firms, the goal is to take control of financial management by automating complex revenue recognition processes and subscription billing.
Fast growth requires fast decisions made with the right information. All companies struggle to do this. But SaaS companies face more challenges. You construct your metrics reports with data you’ve pulled from disparate applications, and then aggregate that data and perform calculations within spreadsheets—typically a time-consuming, error-prone process. What if you could easily capture and instantly access the detailed metrics you need, right when you need them? What if these metrics shed light on the pitfalls and opportunities ahead, as well as the root causes of performance trends? Real-time SaaS metrics that extend outside of GAAP financial measures to include operational metrics are critical for your board reporting. They enable:
- Faster decisions with key, real-time SaaS metrics.
- Actionable insights from trends and details view-able by key business drivers.
- Elimination of manual effort and the risk of inaccuracies through automation.
- Capturing unique outcomes by tailoring SaaS metrics to your business processes, down to transaction-level data.
As SaaS companies scale, there are a variety of key metrics that are needed to fully understand organizational health and determine the best ways to optimize the business. The importance of these metrics change throughout the company growth lifecycle, as do the underlying processes that produce them. Lets look at how these change over time.
Key SaaS Metrics
The numbers used to spot trends, compare to benchmarks, drill down into the source data, and make quicker, more sound strategic decisions include:
- Churn
- Customer Lifetime Value (CLTV)
- Customer Acquisition Cost (CAC)
- Committed Monthly Recurring Revenue (CMRR)
- Annual or Monthly Recurring Revenue (ARR or MRR)
Companies in the formative Super Early Stage are looking for product/market fit, and are often less detailed in their financials. As firms move into Series A and early stage, they are looking for initial traction. The key metrics for these companies to understand include:
- What is their Monthly Recurring Revenue (MRR) or their Annual Recurring Revenue (ARR)?
- What is it costing these companies to bring on new customers? Customer Acquisition Costs (CAC) will include all the Sales and Marketing costs required to close a deal.
As traction turns into expanded growth in Series C or D and Mezzanine rounds, the management teams are diving more into efficiency. The metrics companies at this stage need to understand include:
- What is the company’s Gross Margin?
- What is the ratio between their Customer Lifetime Value (CLTV) of revenues to the business, compared to what it cost to acquire them?
- Who is staying with the company when it comes time to renew, and who is leaving via Churn? This can be tracked and managed on a customer count or a dollar amount such as ARR.
For that magical moment of the IPO and beyond, new metrics emerge as companies face the public markets and need to give more visibility to the future. These companies need to understand:
- What are their deferred revenues and the earnings before interest, tax, depreciation, and amortization (EBITDA)? These are key measures of a company’s operating performance.
- What are the overall company expenses and the year over year growth on the number of customers?
In the SaaS world, it is critical to understand which metrics really matter and at what stage of company growth. There is an evolution of sophistication over time that matches the complexity and expansion that happen as companies find their way through crossing the chasm, into the bowling alley, and then through the tornado.
Sage Intacct can help you make quicker, more sound strategic decisions with real-time SaaS metrics that go beyond GAAP financials to include operational metrics—together, these are the critical metrics for your board reporting. Captured in an automated process from inside Sage Intacct, they’re every bit as complete and accurate as your GAAP financials. The metrics for your SaaS business are delivered via a dashboard as performance cards, reports, charts, and graphs that you can use to spot trends, compare to benchmarks, drill down into the source data, and more.