When you start to scale up your MRR business, you’ll want to start tracking more metrics and get your hands on more data about your business to help you scale up even more. However, if you’re still a relatively small business, a start-up or you’ve just launched your MRR WordPress business there are just a few data points and metrics that you can focus on to begin analysing your business to see how you’re doing and learn how to improve things. Keep in mind that in this article, just a few of the main metrics are covered to get you started – there are a ton more if you want to go deeper, so take a look at the end of the post to find more information on those.
MRR (Monthly Recurring Revenue)
At the top of your list should be MRR. It goes without saying that if you’re running a monthly recurring revenue business (a subscription or SaaS), you need to be tracking your MRR trend!
This metric is the holy grail. You need to keep track of how much money is regularly coming into your business so that you can make decisions about hiring, marketing, sales acquisition and other expenses.
MRR increases with sales, but it will decrease as customers cancel their subscriptions or plans and if customers have the option to downgrade their subscription which leads to lower MRR overall (otherwise known as ‘Churned MRR). It will also increase if a customer upgrades (otherwise known as ‘Expansion MRR’).
MRR is pretty easy to calculate. In its simplest form, you’d multiply your revenue per customer/account by the total number of customers for that month.
Number customers for the month X the average amount billed = Your MRR for the month
The type of MRR to track are:
- New MRR – A new paying customer
- Lost MRR – MRR lost due to cancellations
- Contraction MRR – MRR lost from an existing customer because of a downgrade
- Expansion MRR – MRR won from an existing customer because they upgraded (or purchased another MRR service of yours as an existing customer)
You should also consider tracking:
- Reactivation MRR – MRR from customers who have returned
If your MRR is going up but you’re losing more customers each month than you’re gaining (either through cancellations, downgrades or a combination), your business isn’t sustainable and you have a problem.
Churn (User Churn & Revenue Churn)
Your churn rate tells you a lot about your business. If your churn rate is high, there could be something fundamentally wrong with your service or product (eg it isn’t meeting expectations). It could also mean that there’s a huge gap between what your sales team are selling and what your customers are expecting, that your customer onboarding process doesn’t deliver enough value in the crucial first and second month a customer signs up with you or your customer service may not be up to scratch. There’s a lot to look into when you hit a high churn rate, and it can be a shock once you start measuring this, but the sooner you start to accept churn in your business the sooner you can start plugging the holes that are losing you money.
The churn rate is calculated by dividing the number of customers you lost during the month by the number of customers you had at the beginning of your month plus the number of new customers that joined you during the same period.
Customers at the start of the month = 2000
New customers added that same month = 400
Customers lost during the same month = 300
Churn rate – 300/2400 = 13% churn rate
User Churn = A complete loss of customer MRR
Revenue Churn = A partial loss of customer MRR
Keep in mind that if you’re a new SaaS, you’ve gone hard on sales/marketing or for any other reason you’re selling fast, these new customers will skew your churn rates and it’ll make it look like your churn rate is better than it is. To resolve this issue, take a look at ‘Probability Churn‘ which can give you a much better view when you’re gaining new customers rapidly.
Lifetime Value (LTV)
Customer Lifetime Value is another important metric to track. It’s the amount of revenue a customer contributes to your business during the lifetime of their account. LTV increases as you win a customer over for another month. The cost of acquisition is lower with existing customers than it is to win over brand-new ones, so this is an important metric to keep an eye on. LTV increases when a customer stays with you month after month and will increase as you upsell or sell add-ons to existing clients.
Going Deeper into SaaS Metrics
Only a few of the basic metrics were covered in this article, but starting to track these will have you well on your way to identifying trends and improving your MRR business so that you can earn more monthly recurring revenue.
Focusing on a few metrics, fully understanding them and then analysing for improvements will show up holes in your business. Don’t be discouraged, it’s exactly what you need to see to be able to patch them up and make your product bigger and better for your customers so that your business is up for the long term.
If you want to dive deeper into more metrics, check out this comprehensive list of 16 Essential SaaS Sales Metrics You Should be Tracking by databox.
Subscription Analytics Software
When you first start looking into all of the data that you need to track to keep your SaaS or subscription business running smoothly it can feel quite overwhelming. Luckily, there are a ton of different subscription analytics software dashboards and systems to help you keep everything together. Take a look at a few of the suggestions below if you’re looking to hook up an easy-to-read metrics dashboard for your WordPress MRR business: