Measuring And Monitoring A Lucrative SaaS Business Objective With Key Performance Indicators

Setting a goal is an investment in your future self. It gives you the opportunity to strengthen your knowledge, manage your time, and utilize the resources available to you. By setting short and long-term goals, the path to your ultimate objective becomes clearer and easier to achieve. These milestones, whether big or small, can help to formulate a successful vision as well as motivate you to keep moving forward. 

The same goes for any business working towards a common objective. Companies can still profit without one, but by honing in on best practices and analyzing all of the data that gets collected over time, setting a goal can take a good company and make it great. Every business should have a performance objective to strive for, or risk missing out on key factors that will benefit the longevity of its place in the industry.

For SaaS companies with a variety of metrics monitoring each element of their business, this can seem like an overwhelming task. There are so many variables that tie in to the success of a business model, so how is it even possible to know where to start?

In this article, we’ll break down the process of figuring out what kind of objective will best support your business’s growth, how to kickstart this process and get your department teams on board, and most importantly, the way to measure all of this progress through the creation of a Key Performance Indicator. By using these elements efficiently, your business will mature in a direction that leads to profit and confidence in future endeavors.

What’s a Key Performance Indicator?

A KPI is a measurement of how effectively a business is reaching its performance objectives. As a company sets a goal that will ultimately increase profits and grow their business, KPIs monitor its traction and adherence to the set timeline. Besides guiding the performance targets for a better aim, these indicators also generate a way to determine how efficiently the goal is being met. In other words, the metrics used to reach your goal also provide a measured gauge on whether or not the company will be successful at reaching their goals.

There are two kinds of KPIs: high-level and low-level. The former focuses on the overall performance of a company, i.e. the main goal that everyone in the business strives to reach. If high-level KPIs monitor the guidance of a goal that affects the entire company’s health, low-level KPIs are the steps within this system to make it actionable. Low-level KPIs are developed in response to the objective set in the high-level, and they monitor the degree of performance from each department as opposed to the company as a whole.

With this in mind, let’s take a look at how to start thinking about the unique qualities of your company to best determine what methods will make a successful business objective.

5 Questions to Answer for a Stronger Foundation

Determining what KPI best works for your company’s unique vision isn’t always as simple as it sounds. All companies want to expand and increase profit, but the ways in which this can occur are varied and often evolve as a business learns more about itself and its customers. 

Here are five questions to answer that will help guide the process of deciding on the right business objective for your company, and the best KPI to measure its success.

1. What is your company’s current position?

Objectives need to be relevant in order for them to work. Being honest about the current status of your company gives you the springboard necessary for knowing where to go to improve its health and success. By using data you’ve already compiled through your various business metrics, it’s much easier to see where you are thriving and what needs more attention. This data indicates what kind of objective will be most advantageous to your business in growing it in the desired direction that progresses from where you are now.

Analysis of your company’s current performance may include areas such as:

  • Sales Volume: How many units did your company sell in a given month/quarter/year? A different measurement than total sales, which calculates revenue, volume of sales can be an indicator of how profitable a company is based on their projected sales vs. actual sales. 
  • MRR Growth: How much is revenue increasing from subscriptions? The rate of this growth from month to month shows how fast your business is growing, and can be affected by factors such as customer acquisition and retention, as well as pricing of your subscriptions.
  • Customers: How many do you currently have? This number will obviously vary from company to company, but by calculating the amount of money each customer brings in through subscription purchases vs. customer acquisition costs, or CAC, this will determine whether or not your current customer base is enough to sustain a healthy business.
  • Churn Rate: What percentage of customers stop subscribing? The amount of customers who churn can determine the quantity of revenue lost. The growth rate of incoming customers should exceed the number of those who churn, and even though every company will have some amount of loss, a high churn rate can still impede its full growth capacity.

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2. What are your objectives?

Once you have a better understanding of where your company stands in regards to its current position, you can then identify what business objectives could help improve this status. Having a clear objective will help you pinpoint a KPI that can measure the progress of how well this goal is being reached. Your “key” objective determines the overall success of your company, meaning its outcome impacts the business and its growth. 

The best way to choose an objective that offers this kind of progress is through a strategic approach that determines why it’s important for the success of your business. Using the SMARTER method will weed out any unnecessary objectives that seem like good choices towards expansion, but could actually lead your company away from a more profitable avenue that wasn’t fully examined.

The SMARTER method helps determine the utility of a chosen objective. It stands for:

  • Specific
  • Measurable
  • Attainable
  • Relevant
  • Time-bound 
  • Evaluation
  • Re-evaluation

When deciding on a key business objective, first it must be Specific. The more defined an objective is, the better. It gives a clear starting point from which the milestones can be developed, and therefore keeps everyone involved on target without leaving any grey area for misinterpretation.

The goal must also be Measurable, meaning you should be able to notice the level of progress as well as have a clear answer as to whether or not you’ve achieved it. This goes for your main company goal as well as the smaller goals that must be accomplished on the path to success.

Attainability is very important, and often a difficult truth to come to terms with. Having lofty goals that can never be reached will not only frustrate and discourage employees, but also set the company up for failure. Use any data your business has already collected based on previous growth, or determine where you fit within industry standards, and come up with an objective that can be fulfilled within a given timeline. The same goes for a goal that isn’t big enough–if you complete your objectives early, it leaves your company without something to work towards, which can waste time and resources.

An objective that is Relevant ties back to understanding what your current position is, and what tactics have been successful thus far. It makes no sense to choose an objective that has nothing to do with your business, which is a common mistake when looking at how competitors are improving through their own unique strategies. All companies operate differently, with different definitions of success, so be sure your objective is applicable to what you want to accomplish.

Knowing the amount of Time your company has in order to reap the benefits of the objective is the first step in working backwards towards planning the preceding milestones. Setting a deadline will determine when specific tasks need to be completed, and how complex these tasks can be in order for them to be achievable.

Evaluating and Re-evaluating are meant to keep the plan focused and determine if a new course of action needs to be taken. Solidifying the objective based on the knowledge gleaned from the former five criteria is a great start, but only through continuous data analysis and feedback can a clear path evolve. The habit of frequent reviews must be maintained in order to track the effectiveness of a metric and oversee its success. By reviewing the data weekly as well as monthly, you’ll know right away if a department is veering off track.

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3. What is your plan of action?

Working Backwards:

Initiating the plan towards an actionable KPI means beginning with the high-level KPI and working backwards. As previously stated, this sets the goal for the entire company and becomes the focal point upon which the rest of the plan is created. From this perspective, the best practices to get to the goal can be better determined, and low-level KPIs can be more easily set for each department.

These stepping stones should be created in reverse timeline order, starting with the high-level KPI and working backwards towards where the company currently stands. 

Backward goal-setting is a very efficient method to reaching your desired results because it sets a predetermined set of smaller objectives in a straightforward line, as opposed to wasting energy in deciding how to tackle every task as they come. Planning out each step to success manages the timeline better and makes everyone aware if they are no longer aligned with the main goal. 

It works the same way as planning your day the night before–creating a task list for the morning, setting the coffee maker to go off as you wake up, setting an alarm, picking out your outfit–it’s all meant to better prepare you for your morning routine. By keeping one eye on the goal, you can step backwards and determine the best course of action.

Reviews and Revisions

As a company works towards their objective, it’s vital to review progress and readjust as needed. Assessing progress regularly will shed awareness to when the company is no longer aligned with its intended objective. A good plan of action leaves room for questioning the vitality of an objective and whether or not it needs to change.

KPIs evolve with the company. Since SaaS companies are constantly changing and growing to suit their goals as well as maintain a positive relationship with customers, new objectives may emerge over time. By testing business methods and discovering the best outcomes, it helps to define a level of success that works. You don’t want to waste time, money, and effort on following a KPI that no longer fits with the company’s objectives. The more often you review your progress, the better chance you’ll have at finessing the process and steering the strategy to a goal that benefits your business.

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4. Who is implementing these plans?

A company’s stakeholders must understand the goal in order for it to be reached. By sharing the KPI with employees, this communication provides everyone with a compass to help direct them. When explaining the strategy of a KPI, it must be expressed exactly what it is you’re measuring, and why it’s important. From there, the low-level KPIs can be discussed, generated, and distributed to their proper departments.

With each milestone in place, the next step in an efficient strategy is making sure everyone involved knows their tasks. Company-wide communication of what every department and individual employee will be taking on not only identifies the separate team objectives, but also facilitates a continuous link between these departments. It keeps everyone on the same page within the confines of the timeline, while simultaneously making sure each of the necessary tasks are being handled properly. 

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5. What do your employees think?

A great way to evaluate the objective and sketching out a rough draft of the process is to present the plan to each department and its employees.

Feedback from the groups who will be implementing the process is an excellent way to know what will work and what needs re-thinking. Defer to their better judgement. They have more in-depth knowledge of the inner workings of the company, so trust that they know whether or not a goal is realistic.

Input from employees can tell you whether an objective’s timeline needs adjusting, if each department has the capabilities to realistically achieve their given tasks, what metrics need to be instilled to fit the mold of the KPI, and which tactics within the plan are beneficial and which aren’t.

This process can also surface whether or not a chosen objective is even a correct fit for the company, as employees may express a better option that they’ve noticed within their department. They have the intuitive knowledge that can shed some light on other situations that may need higher priority attention, or offer improvements to the strategy as a whole.

If there are a lot of questions or concerns, the KPI may need to be reevaluated or explained in a clearer way.

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Metrics to Monitor

While your KPI is, itself, a metric, there are other metrics within the standard operating procedures of your company that can help facilitate the impact of a KPI. These metrics measure performance to let you know if the predetermined guidelines of a KPI are being adhered to. The following is a list of metrics for any SaaS company to monitor, as well as some examples of analytical tools to make this process easier.

Customer Relationship Management Metrics

Rate of Visitors

The amount of people who visit your website in a given time, usually measured month to month, shows the size of your audience as well as the success rate of your marketing strategies. To measure customer engagement metrics, look for the amount of time visitors spend on your site, how many pages they visit and which links are opened, what kind of downloadable content is being utilized and how often, and the volume of sign ups to resources like email subscriptions. 

The quality of this traffic can also be monitored, such as unique visitors, or users who come to your website more than once. By tracking audience behavior, it will be more apparent which tools on your website to promote, and which need to be redistributed in a way that incites a successful CTA, or Call To Action.

The most popular tool for measuring website traffic is Google Analytics, which also tracks goal conversions and visitor count in real time. It’s free to sign up, and also offers a more robust option for larger companies with a paid subscription to Google Analytics 360.

Onboarding

By monitoring how many people are signing up for a free trial or freemium of your product, you can gauge the level of user satisfaction with your brand. During the onboarding process, you are able to track engagement with the product, including utilization of the different features within a trial, as well as any options for support, such as self-service through demonstrations and tutorials. The amount of users converting to a paid subscription measures how effective your onboarding strategy is.

Mixpanel analyzes this onboarding process based on the personas of your users and their behaviors, as well as the popularity of product features. It also notes the specific moments and patterns where users either convert into paying customers, or start to show a lack of engagement, which allows you to see the segments of your audience that are succeeding and which need more attention to help them finish the onboarding process.

Customer Retention Rate (CRR)

Customer Retention Rate is a number that pertains to how many customers are loyal to your brand, as they are the active users who continuously return to your product. A customer’s Lifetime Value, or LTV, correlates to how long they’ve been a monthly subscriber, and therefore the amount of monthly or yearly revenue they’ve generated throughout this relationship. Retaining customers is less costly than obtaining new ones, so maintaining this rate is an important metric to monitor. It shows the level of customer satisfaction with your product and your company as a whole.

Improving on your customer success strategy is one of the key features of Gainsight’s platform. Besides collecting and reporting on data such as feature usage and support ticket volume, this tool provides insight into your customer base to ensure an excellent experience with your product. It easily predicts patterns in customer behavior to alert you when a user may want to churn, allowing you to take a proactive approach in maintaining CRR.

Churn Rate

All companies experience churn, but the rate of this occurrence points to progress as well as failures within the customer success strategy. If too many users are churning, not only does it mean a loss in recurring revenue, but also that more money is being spent on acquiring new leads as opposed to taking action to retain the ones you already have. A small percentage is healthy and normal, and the data generated from these users can be used to improve on your business strategy and strengthen weak support metrics. In order to lower the rate of churn, passive users must be monitored and re-engaged so they see the value of your product. This can be done through support tactics like checkup emails and reminders of features through in-app notifications.

Churnly is a software that helps predict users who may churn by monitoring patterns in customer behavior. They notify you of any red flags and warning signs so you can take preventative action right away and work towards re-engaging the customer. It also collects data to show any similarities between user segments, which better analyzes the different customer journeys and where certain strategies may need to be improved for better retention. Churnly also integrates with other applications so you can import all the information you need for this analysis.

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Marketing Metrics

Website Traffic

Besides the amount of visitors coming to your website, this traffic should also be monitored based on how they heard about your product and your business. This entails tracking users that visit by way of paid advertising, unpaid or organic traffic, or viral marketing. 

Tracking the amount of consumers who find your company through Pay-Per-Click (PPC) will inform you on whether or not this tactic is a good investment, or if the strategy around paid advertisements needs to improve. 

The volume of unpaid traffic depends on SEO, or Search Engine Optimization, meaning the amount of visitors who found your product through searching online identifies the efficiency of things like keyword usage, ranking, and content that leads back to your brand. 

Viral marketing, or word-of-mouth marketing, occurs when satisfied customers freely recommend and promote your product to others and drive potential leads to your business. This can be a great indicator of how successful your customer experience strategy is, or if these tactics need to be improved.

By tracking all of these marketing tactics, it will show what strategy is most effective for your business, which informs you on where to invest. Google Analytics can keep track of this data, but other tools like Kissmetrics track more specific data such as the behavior of individual users as opposed to entire segments. Kissmetrics also monitors the amount of traffic coming from your various channels including mobile users.

Customer Acquisition Cost (CAC)

The amount it costs to acquire new leads and customers determines the success rate of marketing metrics. If CAC is high, your marketing strategy or sales model might be overcomplicated. Test different techniques and improve on the profitable ones, and invest in an easier process to keep costs low. To know if your CAC is higher than it should be, simply identify the lifetime value of your customers and make sure it exceeds the acquisition cost in order to garner profit.

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Sales Metrics

Monthly Recurring Revenue (MRR)

As stated at the beginning of this article, MRR is the incoming revenue generated from paid subscriptions. There are a few different kinds of revenue, and they all need to be calculated in order to determine net worth. The most important kinds of revenue to calculate are revenue from new customers, expansion from customer add-ons, and losses from churn. When MRR is calculated properly, it identifies whether or not your company has a high retention rate. From this point, it’s much easier to determine the number of deals that need to be closed in order to meet quarterly revenue goals. This progress should be tracked weekly or monthly to stay aligned with revenue objectives.

A billing platform like Chargebee manages subscriptions and analyzes the data they produce. This tool can help optimize sales by providing options to experiment with different pricing models. It also integrates with other applications to create more informed data reports.

Average Revenue Per Account (ARPA)

Another metric that monitors sales growth is the Average Revenue Per Account, which measures the average amount of money coming in from each customer. This is a more detailed look at revenue, and is calculated by dividing total revenue from the number of customers a company currently has. The volume of this income should be separated by new and existing customers to inform you of specific changes within your customer base, and should be tracked monthly.

Lead Velocity Rate (LVR)

This metric measures your audience pipeline development, or how efficiently leads are moving towards converting to paying customers. Understanding the monthly amount of leads that become customers not only informs you of your conversion rate and the efficiency of its tactics, but also how many new leads your company requires in order to meet a revenue target. This number can be calculated month to month by analyzing the increase in conversions from this month to last month. The rate of this growth could mean your sales team needs to shift its priorities towards acquiring new leads if the revenue goal is to be met on time.

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Support Metrics

Ticket Volume

Offering self-service options for users is a great tool for customers who want to find answers to their questions on their own, but depending on the complexity of your software, a support team will most likely have to clarify any additional queries. 

One of the best ways to analyze your company’s support team is by ticket volume, or the amount of user requests for support. The frequency of tickets as well as any patterns in time of day, specific tag use, or correlations within a particular segment can show that the user interface is missing some vital pieces of information. Perhaps a tutorial needs to be re-designed to add clarity, or emails could be sent out to your subscription base with helpful links to more descriptive documentation that will ease customers’ experience with your product.

Average First Response Time

Another support metric to monitor is average first response time, meaning how quickly the support team responds to a customer request ticket. The length of time it takes to help a customer solve their problem or answer a question determines their satisfaction and engagement with the problem, so if these queries leave the customer waiting, their perception of your brand may decrease. This average shows how effectively a support team works and how well they manage their workflow. A good way to keep these numbers down is by providing self-support avenues, so customers have the option to find answers themselves before having to contact a support member. 

Average Resolution Time

First response time is important because you don’t want to make customers wait for a reply, but resolution time is even more critical because it determines how quickly the support team is solving these problems. The goal is to help customers as quickly as possible to keep them engaged with your product. Tactics to improve this rate include scripted prompts so that support isn’t at a loss for words, and also easy access to documentation of the customer’s information so the support member knows exactly where the customer is in regard to their product usage.

To ensure your support team is meeting customer satisfaction goals, a tool like Freshdesk can organize all of your support team’s tactics in one place. Freshdesk groups conversations between email, phone, and chat automatically so they’re easier to find the stored data about a customer’s query information. It also has an easy collaboration element which connects colleagues to certain tickets so they get solved faster. With their team dashboard, everyone involved in customer support can quickly monitor the customizable metrics.

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Net Promoter Score (NPS)

This number determines the satisfaction of customers, and correlates to their retention rate.

Customers are divided into three categories: promoters, who score high and are satisfied with your product and their experience with it, detractors, who score low and are dissatisfied, and passives, who land somewhere in the middle and are not calculated in the overall score.

To learn your NPS, take the percentage of detractors and subtract it from the percentage of promoters. The higher the score, the healthier your audience satisfaction. A high NPS could mean a good amount of self-promotion from customers who enjoy your product enough to recommend it to others. This score measures customer responses from everything they interact with, like your support team or product features.

Analyzing the data between the three types of users can start the process of strategizing on how to enhance customer satisfaction practices. By understanding why detractors and passives are dissatisfied and why promoters are more successful, helpful tactics to improve customer experience can be pinpointed and implemented.

The easiest way to learn if your customers are satisfied and why is by simply asking them and analyzing the data. SurveyMonkey does much more than generate questionnaires, it collects and organizes market data, trends within your audience, and easy connection with customers.

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KPI Dashboard Systems

This is a long list of metrics to monitor, and becomes even more complicated when trying to organize and present the data so that your company and its various departments stay aligned with the KPI. Reports can be created through spreadsheets or presentations, but a visualization tool such as a Dashboard System is the most effective route.

This kind of application updates information automatically and in real time, integrates with other apps to consolidate all of your metrics into one place, and provides access to each department. When everybody knows the plan, the goal becomes clearer and easier to reach.

Here are 8 examples of popular KPI Dashboard Systems and a brief list of their key features:

#1 Smartsheet

  • Easy collaboration and information sharing
  • Automatic alerts on approaching deadlines
  • Scalable analytics
  • Integrates with third-party apps

#2 Zoho Reports

  • Connects with third-party apps, cloud databases, and more
  • Ease of data organization
  • Insightful analysis
  • Predicts trends
  • Powerful visualization with drag-and-drop interface
  • Quick collaboration and data sharing tools

#3 Databox

  • 200+ dashboard templates
  • Integrates with third-party apps
  • Progress visualizer
  • Performance alerts

#4 Datablocks

  • Owned by Databox
  • Custom-build your own dashboard

#5 Klipfolio

  • Cloud-based application
  • Connects instantly with other cloud applications
  • Remote access
  • Stores data history
  • Personalization with custom themes and branding

#6 Datapine

  • Custom dashboards by function, industry, or platform
  • Automated reporting
  • Performance alerts
  • New customer relationships
  • Predictive analytics

#7 Tableau

  • Ease of use
  • Automatically refreshes data from third-party apps
  • Connection to other members in their community
  • Daily reports sent automatically to your inbox

#8 Geckoboard

  • Easy startup
  • Clear presentation
  • Analyzes data in real time
  • Integrates with third-party apps
  • Live dashboard can be shared easily on larger TV screens

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Summary and Conclusion

In summation of this article, the main steps you need to take for a clear objective and durable KPI to emerge are dependent on:

  1. Defining your business’s current position and health
  2. Using the available data to determine what practices are already successful
  3. Creating an objective that adheres to the SMARTER method
  4. Identifying the milestones towards this main goal by working backwards
  5. Laying out the plan and ensuring each department knows their objectives
  6. Acquiring feedback from employees for in-depth knowledge
  7. Continuous review of the data as you move closer to the business objective
  8. Redirecting a goal if your KPI surfaces a more lucrative path to success

In order for a business to advance in a profitable direction, a suitable objective must be decided upon. When the proper time and care are spent on developing a goal and the metrics used to measure its efficacy, this business objective becomes that much more achievable. But don’t set this goal in stone–allow room for it to breathe so it can evolve with your growing business. It doesn’t matter whether your company wants to increase its revenue or improve on customer support strategies; whatever goal evolves out of enriching your practices to uphold a high standard will speak for itself. The proof is in the data, if you know how to measure it.