Are you building a Software-as-a-service (Saas)? Do you wonder if you are tracking the right things? If you came here via Google, then chances are, you are not. Neither did we with ParrotPolls.com. (If you lead a remote team, then take a look at ParrotPolls. It helps you get closer to your team, helps you be aware of problems ahead of time.)
tl;dr: If you have less than ~30,000 unique monthly visitors, focus on getting more visitors. (Hint: product features will not solve this problem. Features do not get you web-site visitors.)
Of course I had heard about churn-rate, conversion-rate and so on. But only after hearing Craig Hewitt, founder of castos, talk about these metrics and explain which ones to track, it clicked for me. (Also, maybe it helped, that my co-founder started tracking some data manually in Google Sheets, where I had been looking for an automated solution. Lesson learned once more: start simple.)
Which Saas metrics to track
Daily Metrics
- Monthly Recurring Revenue (MRR), explanation
- New Trials Started
- New Paying Customers (note: don’t calculate this from by subtracting the total number of paying customer per time period, i.e. today’s number minus yesterday’s number. You really need to track the new sign-ups. That is important, because you need that number to calculate the churn and retention rate.)
Weekly Metrics
- Unique Website Visitors
- New Trials Started
- Conversion Rate: Vistor/Trials
- New Paying Customers
- Conversion Rate: Trial/Paid
- Channel Attribution
Monthly Metrics Report
- Net New Monthly Recurring Revenue (Net New MRR), explanation
- Churn, explanation
- Average Revenue per User (ARPU), explanation
- Life-Time-Value, explanation
- Cost of Acquisition, explanation
What do you do with these numbers?
Craig goes through some examples, to explain, where to focus you effort, just by looking at these number:
- Unique Visitors
- New Trials
- Visitor/Trial Conversion Rate
- New Paying Cumstomers
- Trial/Paid Conversion Rate
- Churn
- LTV
(He adds some assumptions: Current MRR = $10,000, ARPU = $50 (that’s pretty high), gross margin = 75%.)
| Metric | Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 |
|---|---|---|---|---|
| CreditCard at Trial Signup? | yes | yes | no | no |
| Unique Visitors | 2,500 | 2,500 | 10,000 | ▶️ 10,000 |
| New Trials | 20 | 30 | 125 | 150 |
| Visitor/Trial Conversion Rate | ▶️ 0.80% | 1.20% | 1.25% | 1.50% |
| New Paying Cumstomers | 8 | 12 | 8 | 17% |
| Trial/Paid Conversion Rate | 40% | 40% | ▶️ 6% | 17% |
| Churn | 4% | ▶️ 10% | 5% | 6% |
| LTV | $937 | $375 | $750 | $625 |
Click on the ▶️ highlighted part to jump to the explanation in Craig’s talk.
Craig’s rules of thumb
Rule no. 1
| Credit card required? | Trial/Paid conversion rate | Revenue churn | then |
|---|---|---|---|
| yes | > 35 % | < 6 % | focus on getting more visitors |
| yes | < 35 % | > 6 % | focus on retention, you might not have product market fit ⚠️ |
| no | > 10 % | < 6 % | focus on getting more visitors |
| no | < 10 % | > 6 % | focus on retention, you might not have product market fit ⚠️ |
Rule no. 2
If the rest of your business metrics are looking good, then:
“If you have less than 30,000 unique visitors/month then getting mor traffic is likely your best ROI.” Craig Hewitt
My take-away from part one of Craig’s talk
- Know your metrics
- In the beginning, you probably just need more visitors (rule no. 2)
- Check yourself: do you have product market fit? (rule no. 1)
- Adding new product features will not get you more visitors. That’s what marketing is for.
Check out the rest of Craig’s talk! There is a whole second part that I do not cover here, where he talks about the customer journey and focussing on user acquisition.
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