7 Essential SaaS Growth Metrics to Measure Growth in 2023

Growth metrics are key to a successful SaaS business. While you can’t control other factors that affect growth, you can measure what matters most to your business. By knowing the data, you’ll be able to make better decisions about your products and services. Here are ten crucial growth metrics to track success in 2023:

MRR and ARR

Monthly Recurring Revenue is referred to as MRR. MRR that measures the amount of money your customers pay each month. It is typically the largest contributor to your overall growth rate.

ARR stands for Annual Recurring Revenue. This is similar to MRR, but the difference between the two is that ARR measures long-term expectations of what customers will pay rather than just a monthly invoice.

Customer Churn

Customer churn is a critical metric to track. It is a measure of how many customers are leaving your SaaS business. Customer churn can be measured in terms of days or months.

The higher your customer churn, the worse your revenue is likely to be. The lower it is, the more stable your revenue.

Contraction

How many new consumers your business adds each month is measured by contraction. The number of inactive clients is subtracted from the total number of active customers to determine the contraction.

Contraction is employed because it is simple to compare the outcomes of one month to those of another. You are losing ground and need to take action if you have more inactive consumers in one month than the other.

Activation Rate

Activation rate is a crucial SaaS growth metric that measures the number of users who have opted into your product. It’s important to know if you are activating your users because this is where you can learn whether people are using your product.

The activation rate is calculated by dividing actual user signups by the total number of new signups. If you activate 30 people out of 100, then your activation rate is 30%. The more users you activate, the better!

Revenue churn 

Revenue churn is the number of customers who left your SaaS in a given period. It’s an essential indicator of customer retention and a way to measure whether you are retaining customers at a high rate.

A high revenue churn rate indicates that your business isn’t sustainable and that you need to do something to improve customer retention.

There are two main reasons why your revenue churn may be high:

• Your customer acquisition strategy isn’t effective enough to keep customers happy
• Your product isn’t good enough to keep customers satisfied.

Lead Velocity Rate 

The number of qualified leads you generate per month divided by lead volume is the lead velocity rate. Lead velocity rate is significant because it helps you manage your pipeline and track how well you’re growing. It’s also helpful to see how quickly you can close deals and make money.

Lead velocity rate helps you measure your SaaS sales team’s performance. A high lead velocity rate can indicate that your sales team is working efficiently, while a low one means they are not reaching out to enough prospects to close deals.

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Quick Ratio 

The quick ratio is a metric that measures how much cash you have available to meet your short-term obligations. The quick ratio is calculated by dividing total current assets by current liabilities.

The higher your quick ratio, the more money you have to pay bills and service debts. It’s a good indicator of financial health and is typically used as a measure of liquidity in the business.

Trial Conversion Rate

The trial conversion rate is the number of new trial signups that convert to paying customers. A high trial conversion rate can help SaaS companies grow their business and increase revenue. It also shows that your product or service is well-suited for a specific audience.

If you have a high trial conversion rate, you’re doing something right. But, that doesn’t always mean it will be easy raise that percentage. As with any metric, there’s a lot of data behind it, and it takes time to understand what works best for your company.

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Qualified Marketing Traffic

Qualified marketing traffic is defined as any traffic that has been tracked, determined to be interested in your product or service, and qualified to receive additional messages.

For SaaS businesses, qualified marketing traffic is essential since it enables you to categorize customers according to their level of interest in your product. This might help you decide what content to deliver them and which channels will work best for them.

Lead-to-Customer Rate

Lead-to-customer rate is the percentage of leads generated from your marketing campaigns that convert into customers. This metric is a good measure of your sales team’s conversion success.

If the lead-to-customer rate is lower than your industry average, you should adjust it to get closer to the average. If it’s higher than your industry average, you should adjust it to get closer to the average.

It’s an important metric because it shows how effective your marketing efforts are and whether you’re generating enough qualified leads.

Customer Health Score 

Customer health score (or customer satisfaction) is a crucial metric for SaaS companies. It measures how happy customers are with your product.

The algorithm considers customer feedback, problems, and complaints to calculate the customer health score. A higher customer health score means that customers are happier with your product.

When you’re starting, it’s best to focus on improving your customer health score as opposed to growing revenue or reducing churn. This is because you’ll need more time before you can measure revenue accurately and effectively reduce churn.

Bottom Line 

SaaS businesses are growing by leaps and bounds. When it comes to success for SaaS business growth, there are many metrics that you’ll need to track. The above SaaS growth metrics are highly beneficial for determining if you are on track for success.

Zorbis provides End-to-end SaaS solutions from SaaS application development to deployment, SaaS Platform Development, SaaS Product, and SaaS software solutions. To learn more about our services, visit our website.