THE MUST-HAVE REPORTS FOR SAAS STARTUPS
If you are part of a SaaS or subscription-based startup, then pay close attention to this week's newsletter. There are many important elements to pay attention to, but we want to share a list of the 4 most important KPIs to follow and how to track them.
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💰 Revenue Model: Unless your users are the product, revenue must be your north star metric. This is the ultimate measure of your business success. It shows you how much money you’re making from your customers, and how predictable and sustainable your revenue stream is. It requires calculating your monthly recurring revenue (MRR), annual recurring revenue (ARR), your churn rate, retention rate, and expansion rate.
- Why it Matters: It allows you to forecast future MRR based on trends to date, consider changes at the component level (e.g. increased new MRR), and even model what it takes to achieve specific outcomes (e.g. what would it take to double MRR by year-end?). Most of all, it’s a tool to evaluate the impact of your key decisions, new initiatives, or trends. It’s the core model for understanding and growing any subscription business
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💸 Cash Burn Model: This is the measure of your financial health. It shows you how much money you’re spending to run your business, and how long you can survive before running out of cash. It requires calculating your burn rate, runway, and breakeven point. It will help determine if you’re default alive or default dead, and what that means for your fundraising strategy.
- Why it Matters: You always need to conserve cash and know how much runway your startup has left. It only gets harder to manage when you hit Product-Market Fit or hypergrowth because the volume of transactions - new customers, server and software spend, hiring, etc. - also grows rapidly.
- Why it Matters: You always need to conserve cash and know how much runway your startup has left. It only gets harder to manage when you hit Product-Market Fit or hypergrowth because the volume of transactions - new customers, server and software spend, hiring, etc. - also grows rapidly.
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📊 Cohort Retention Report: SaaS startups live or die by retention - you have to get this right. This is the measure of your customer loyalty. It shows you how well you’re keeping your customers engaged and satisfied with your product or service over time. It requires segmenting your customers into cohorts and tracking their retention rate.
- Why it Matters: Analyzing retention on a cohort basis is crucial because retention rates vary significantly between new and long-term customers. By doing so, you can observe how retention changes over the customer's lifetime, compare cohorts, identify trends, and determine how to improve retention.
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🎯 Acquisition Funnel Report: New customers are the lifeblood of your business. This report captures your funnel stages and 3 key metrics for each: volume, conversion rate, and time to convert (to the next stage). This framework helps you diagnose issues & identify opportunities, prioritize them by impact, and take action to grow your customer base and revenue.
- Why it Matters: The Acquisition Funnel Report establishes a foundation for you to see how your leads are coming to you and what’s driving them to convert. It gives you a strong understanding of your funnel levers so you can analyze which ones have the highest yield and prioritize those to accelerate customer and revenue growth.
Knowing how to build these models will not only make the startup journey easier, but significantly increase your chances at success.
Join us on Thursday for a longer discussion. See below for details.
Click here for our blog post for a longer discussion on each of the models. Read Blog Post
JOIN US THURSDAY!!!
On Thursday, July 20th @ 2 PM EDT, we will be joined by Rahul Reddy and Kyle Doherty, co-founders of RDC, a full-service RevOps & Analytics agency that helps startups adopt foundational SaaS reporting, tools, and processes to accelerate their revenue growth. Their experience includes building the Business Intelligence and Growth Operations at Trusted Health, high leverage Business Operations and Growth Operations work at Intercom, and Data Science and Full Stack Engineering roles earlier in their careers. RSVP Here
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