Last editedDec 20223 min read
All SaaS companies have their own unique challenges and needs to consider, whether these relate to the specifics of charging monthly subscription fees for your services or more general business performance. To help you understand your position and also achieve your objectives, there are a number of different metrics to help out.
B2B SaaS product metrics are a great way to get a better picture of your business performance, as well as identifying ways that you can grow, picking up on frequent issues that you run into, and keeping you on target with objectives. Keep reading to find out more about B2B SaaS metrics and how you can calculate these.
What is B2B SaaS?
Before diving into the specifics of how to measure these metrics and improve B2B SaaS growth, it’s helpful to first briefly define what is meant by Software as a Service.
Put simply, these are any businesses that provide cloud-based services to other businesses on a subscription basis. This means that payments are made at regular intervals (usually monthly or yearly), and businesses can access the service as long as they continue to make these payments.
B2B SaaS may cover a wide range of different areas, from customer relationship management to accounting systems.
Customer acquisition cost
One essential metric for improving B2B SaaS growth is the customer acquisition cost. As the name suggests, this refers to the average spend you have to make in order to gain a new customer. Finding a low-cost way to acquire new customers is an important way to improve your profits.
The cost of acquiring a customer can be seen as the sales and marketing expenses of your business. The calculation is therefore quite simple: just take your total sales and marketing expenses, and divide these by the number of new customers acquired. This gives you an important statistic that is one of the top B2B SaaS funnel conversion benchmarks.
Don’t forget to account for overhead expenses such as paid advertising, graphic design and payment to third-party sites that offer services such as link building.
Customer retention rate
Another one of the top B2B SaaS product metrics is the customer retention rate, which can be analysed with comparison to the customer acquisition cost. This refers to the percentage of customers that you kept over a given period. You can do this with a time range, by measuring figures such as the 1-month retention rate, or 7-day range retention rate.
To calculate customer retention rate, you need the number of existing customers at the start of the time period (S), the number at the end of the time period (E), and the number of new customers (N). To get customer retention rate, the formula is: [(E – N) / S] * 100.
Customer churn rate
Another crucial metric for B2B SaaS business owners is the customer churn rate. This statistic shows the percentage of users that were lost during a period because of account cancellations.
This can be calculated by dividing the number of customers lost during a given period by the number of customers that you had at the start of the period, and then multiplying by 100 to get a percentage. You should generally aim for a churn rate of under 5%, and if it is higher, try to figure out the reasons that are causing your customers to leave.
Understanding your churn rate is the first step, but next, it’s important to identify why your customers are churning, and how you can counteract this trend. In many cases, churn is caused by failed payments, making Direct Debit (a payment method wherein you “pull” payments directly from the customer’s bank account) a great way to reduce churn. GoCardless enables businesses to collect payments via Direct Debit, and with GoCardless customers experiencing 51% fewer late or incorrect payments (according to a study conducted by Attest, commissioned by GoCardless, July 2021), it can be an excellent means of cutting down on your churn rate.
Lead-to-customer rate is one of the most crucial B2B SaaS funnel conversion benchmarks, as it shows how well you can convert leads into actual paying customers. After all, increasing customers and profits is the ultimate goal.
This metric is easy to calculate. You just have to take the total number of customers in a given month, divide this by the number of leads, and then multiply by 100 to get a percentage.
Understanding this will give you a great idea of which marketing campaigns were most successful and why, helping you to create a more effective strategy in the future.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.