The current trend of companies to migrate to the SaaS model continues to grow. Organizations around the globe have decided to make use of cloud services to optimize their workflows. However, despite their countless benefits, SaaS platforms alone are not a guarantee of total success for enterprises.
On the contrary, to make real progress corporations must constantly monitor the outcome of their activities after the migration process, and the best way to do this is through the right Key Performance Indicators.
Analyzing the KPI’s most relevant to your business is one of the central points of any continuous improvement strategy. That is why today we have brought to you some of the most important Key Performance Indicators that any SaaS company should pay attention to. Read on and find out more.
Why are Key Performance Indicators important?
A Key Performance Indicator (KPI) is a measure of performance that enables organizations to obtain important information about many relevant factors such as the quality of their products and services or the effectiveness of their processes.
These indicators help companies to obtain precise answers related to different key points of the business, for example:
- Are the objectives achievable?
- What is the level of service quality?
- How can the company improve its profitability?
- Is it necessary to change suppliers?
- What kind of products attract more consumers?
- Are customers satisfied?
The main function of KPIs is to help companies discover better ways to manage and optimize their internal operations. This means that the analysis of the right KPIs should contribute to better decision-making in the organization, thus promoting an intelligent strategy of continuous improvement.
How is a Key Performance Indicator established?
For a Key Performance Indicator to have real meaning, it must be linked to a specific objective. Once you define its function, you can use different units according to what you want to measure. For example, in the case of a KPI whose objective is to measure the profitability of a certain project, definitely, one of the units you should use must be some type of currency such as the dollar.
What are the advantages of having performance indicators?
Greater productivity: KPIs contribute, among other things, to companies setting clearer goals. This exponentially affects productivity levels because it allows defining more efficient processes and orienting personnel to achieve precise objectives, without the distraction of having to guess what the next step will be.
Continuous Improvement: KPIs also help companies make better decisions when adapting to change. This represents a great advantage because it allows the organization to achieve continuous improvement in order to maintain its competitiveness.
Increased profitability: Evidently, by increasing productivity and quality of services the company is able to reach, maintain and satisfy a greater number of customers, which translates into greater profitability for the business.
Key Performance Indicators for SaaS companies
There are a huge number of KPIs that companies can use to measure their performance. However, we do not recommend to use more than 10 or 12 KPIs because a larger number of them can make the analysis less practical and effective. Among the most important Key Performance Indicators for SaaS companies we have:
#1 Cost of Customer Acquisition (CAC)
As its name indicates, it represents a measure to calculate the amount of money it costs to acquire a new client. A company that stands out in this indicator must have a CAC equal to zero.
#2 Churn rate
This measure establishes the number of customers that the company loses in a given period (daily /monthly/annual). Churn is essential for SaaS-based businesses, where customers make recurring payments. If the churn rate is high, it clearly means that customers are not satisfied.
# 3 Coverage Margin (MC)
This indicator serves, among other things, to understand which products and services should continue to be developed and which should be discontinued. Such decisions can be made after the CM provides information about the remaining margin after deducting all variable manufacturing costs of the product or service from the total revenue.
#4 Sales Volume
The name of this indicator makes its function quite clear. This is also a very important KPI, as it enables the sellers to set more precisely their objectives. The best way to obtain concise results with this KPI is with the help of modern CRM such as Freshsales. So do not hesitate to invest in such tools to get better results.
Have you established your own KPIs? Now you need state-of-the-art tools to optimize your results. Contact us now for quality advice on the best software solutions on the market. At GB Advisors we strive to offer you the best service and cutting-edge tools.