When it comes to measuring the success of a B2B SaaS business, there are a plethora of metrics to choose from. However, not all metrics are created equal, and certain metrics will be more important to your board than others. In this blog we will break down the 4 most important metrics in B2B SaaS that your board cares about and how to have that information ready at all times.
In short, pipeline velocity is a way to measure revenue generation and ways to make it more efficient. You can track pipeline velocity by factoring in the length of your deal cycle (time from opportunity opened to closed-won) and cross referencing it with the time spent in every individual deal stage. You can drive efficiency by evaluating the components in each deal stage and accelerating those timeline by providing more value, content and setting expectations up front. This can significantly reduce the drag later in the deal cycle. Deal velocity is an important business health metric because knowing it and knowing the levers you can pull to improve it show your board that you understand what drives deals forward and pulls opportunities over the line.
This allows for a repeatable sales process and shows that you’re capable of more accurate forecasting. Your board will want to know that you have a data-driven decision making process when it comes to switching up aspects of your GTM motion. Understanding pipeline velocity and knowing the numbers behind it build trust with your board and also allow for more strategic GTM decisions.
Customer Acquisition Cost (CAC) is another critical metric that your board cares about. CAC represents the total cost of acquiring a new customer, including sales and marketing expenses. To calculate CAC, divide the total sales and marketing expenses for a period by the number of new customers acquired during that period.
CAC is important to your board because it shows how efficiently a SaaS business is acquiring new customers. If a business has a high CAC, it may indicate that its sales and marketing efforts are not effectively targeting the right audience or that its pricing model is not well suited for the market. On the other hand, a low CAC may indicate that a business has found an effective customer acquisition channel or that its pricing model generates enough revenue to cover acquisition costs. In 2023, efficiency is the name of the game and a low CAC is something your board will want you to drive toward.
Customer Churn Rate is the percentage of customers who cancel their subscription or stop using a SaaS product within a given period. To calculate churn rate, divide the number of customers lost during a period by the total number of customers at the beginning of the period.
Customer Churn Rate is important to a board because it shows how well a business is retaining its customers. If a business has a high churn rate, it may indicate that its product is not meeting customer needs or that its customer support is not effective. In addition, a high churn rate can lead to a decline in MRR and make it difficult to sustain growth. On the other hand, a low churn rate indicates that a business is providing value to its customers and is likely to experience long-term growth.
Net Promoter Score (NPS) is a customer loyalty metric.In simple terms it demonstrates the likelihood a customer would recommend a product or service to others. To calculate NPS, businesses ask customers to rate how likely they are to recommend a product on a scale of 0 to 10. Customers who give a rating of 9 or 10 are considered promoters, while customers who give a rating of 6 or below are considered detractors. NPS is then calculated by subtracting the % of detractors from the % of promoters.
Your board cares about NPS because it shows how satisfied customers are with a product or service. A high NPS indicates that customers are likely to continue using a product and recommend it to others, which can lead to increased revenue and growth. Your customers can be your most powerful marketing channel, if you know how to leverage it.
They say you can’t manage what you don’t measure. We know that we need these data points, but how do we get them? The answer; your CRM. Keeping your data hygiene clean in a CRM like Salesforce or HubSpot will make it easy to create reports and dashboards that have things like current ARR, CAC, Churn & NPS at the ready. This all starts with having some basic Sales Dashboards and Customer Success Dashboards in place. Once you have the basics in place to measure things like how much revenue is coming in or churning in a given time period, how happy your customers are, and how much it costs to acquire that new business reporting on these metrics to your board will be a breeze. Nothing sends up a red flag to investors faster than not knowing your numbers. Don’t get caught in that position! Start measuring these metrics now.
As a revenue leader, you should loosely know your ARR, CAC, Churn and NPS numbers off the top of your head at all times. These numbers should be at the forefront of your mind and business since they are indicative of overall business performance. Your board cares about these numbers, which means YOU care about these numbers. Having easy access to this data is absolutely critical to business success. The way to ensure you have access to this information at all times; dashboards & reports.
If you need help setting up the backend of Salesforce so building these reports is easier, feel free to reach out to our team here. Or check out this blog post on the top 3 dashboards every startup sales team needs.