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How To Track Key Performance Indicators For SaaS Businesses - KPI

Posted on the 05 January 2017 by Divine T. @backlinkfy

Getting started with analyzing SaaS marketing and sales data can be hard. A few years ago it was almost impossible to measure advertising success of digital marketing strategies, but today there is data everywhere with big data growing out of control causing a similar problem with overload metrics.

So what data will you analyze to measure your success? 

saas solution

SaaS companies have a different business model than traditional businesses, and tracking the right metrics can make or break your company financially and strategically. With SaaS, Success is classified into many buckets in the funnel and will be totally different from an e-commerce company that sells products directly to consumers.

All this key metrics  will set product sales as the ultimate key performance indicator (KPI). When it comes to subscription software, multiple KPIs can help you determine just how successful you are, because the sells cycle takes a little longer stretch for most potential clients.

To further help you understand a few key things, here are 6 KPI metrics you should be tracking with your SaaS business. Use these key points to further understand your advertising, marketing and sales performance efforts.

1) Offer Free Trial Sign-Ups

Offer a free trial period as the first step of the sales cycle funnel. This is a simple strategy; free trials will help you show off your SaaS, giving potential customers a way to test their needs before making a final purchase decision. Utilize a conversion funnel that tracks how many people convert into trial users from your campaigns and compare with paying customers. Trial sign-ups allow you to measure how your first-touch marketing efforts are performing well and how to improve them based on your offerings.

2) Check Trial Conversion Rates

People enjoy signing up for free to take a test drive, but do they use your product enough to actually pay for it in the end of their test drive?

Trial users don't add value to your business if they don’t take the next step and become paying customers after the trial expires. Keeping track of your conversion rate from trial users to new customers can let you evaluate not just the success of your sales pitches, but also your SaaS tool.

3) Utilize Direct Customers

Not all customers will go through the trial phase. Direct customer acquisitions (e.g web visitors or prospects that became customers without all the funnel steps), are one of the most desirable and profitable type of customers, so keeping track of them is crucial to understanding just how you can increase that number and build a strong customer base without the trial phase of the funnel.

4) Retention Rates

After acquiring customers, every SaaS provider has to contend with customers opting out of using the software over time. Tracking your product’s retention rate allows you to stay ahead of the situation as it happens, while giving you the opportunity to implement strategies that may lower that rate and keep your paying customers.  

5) Monthly Recurring Revenue

This is the direct ROI-related metric of the process. While the above KPIs are crucial to know and improve your customer flow through your funnel, they do not give you direct indications of just where you stand in terms of business revenue.

There are many key metrics you should monitor when building your company, but before you can focus on retention rates, monthly recurring revenue allows you to keep track of income trends and opportunities for improvements to increase the stream. If you charge annually for your software, simply divide your annual recurring revenue by 12 to get to this figure, include discounts to get the right amount.

6) Check Your Upgrade Rate

Ask myself, What your customers will do after they’ve used your software over months or years? They may move on, contributing to your retention rate or just simply fall off the radar completely. Some may stay put and continue using your SaaS or if they are particularly happy with your SaaS solution, they may look to expand its use by upgrading to a better version. In other words, upgrades are not just increased revenue generators; they are particularly accurate indicators of your customer satisfaction rate with your SaaS. That’s why keeping track of your upgrade rate is very important for your business. This will allow you to take early action if the rate drops drastically.

Divine Tumenta is an entrepreneur and professional digital marketing expert based in Los Angeles. He has worked in digital marketing for more than 8 years. He is currently founder and CEO of and a go to consultant for startups and small businesses in the USA.

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