How to calculate active users in a saas startup

Before going into detail on how to calculate active users in a saas, we should remember what an active users is.

Active users in a saas startups are the total number of users who interact with our product in a given period of time. Users who access “x” times to your service and perform “y” actions.

In this article we talk about the different user that you can find in a Saas model.

Saas monthly active users (Mau)

Monthly active users (MAU) in a saas are the total active users during a period of a month.

Waus(Weekly active Users).

Weekly active users are the total active users over a period of one week.

Dau (daily active Users).

Daily active users are the total number of users who participate, in some way, in a product on a given day. In most cases, to be considered “active”, users simply have to log in, and this can cause problems in the future, but we will see this a little later.

Active users, is a kpi to identify, which users we are bringing value and are far from “churn”.

The steps to calculate active users can be seemingly simple, but they can get complicated, depending on the particularities of your solution.

Problems defining the criteria of an saas active user

There are several problems with the DAU:

  1. They are not actionable. You can’t do anything with a DAU that goes down, except wonder what went wrong.
  2. It is a metric that can be easily skewed and manipulated.
  3. One startup calculates active users differently than another, which makes them complicated to benchmark.

To really improve a saas solution and identify that it is relevant to our customers, we have to connect the definition of “asset” with growth objectives. That is, find out what kind of activities and features lead to retention and build the definition of active user around them.

One of the key metrics in retention is the DAU/MAU ratio. This metric is usually a measure of stickiness that tells us how engaged our product is.

This metric is a “must” in many funds above a certain size, a stage that we will analyze later.

Examples of active users in a saas business :

To understand the growth rate of your saas, you decide to measure the number of daily active users. Your definition of “active” is the number of users who have logged in during a given day.

You have worked well on your media strategy and then, you launch a press release, and it has been a success. Many people have signed up for the first time, and then you consider them as “DAU”.

People are “curious” and use your product, it’s a low friction transaction, with zero engagement.

The resulting chart could look something like this:

The danger of defining your “active user” by a minimal metric like logins is that you are only looking at a reflection of the success of a campaign. You’re not measuring the actual usage of your service.

While your DAU is skyrocketing, the number of people using your product is not. People did sign up, but most of them, don’t use your product like they are supposed to.

If you only pay attention to your DAU, you won’t realize that the actual usage is dropping.

In the short term, this seems okay, but over time, you will face a hard correction.

When you launch the product and your users start using your product it will be a reality check. The features you thought would be the most valuable will not be; the features you thought were secondary, have the possibility of being the features of the main experience for some of your users.

Who doesn’t know this story?

Because of this, in the previous post we discussed the importance of prioritizing knowing your users, instead of prioritizing product building.

How to calculate active users?

To really understand what is going on with your saas, you have to be able to identify what set of actions your most frequent users perform.

  • What actions represent your users?
  • What events do they perform within a session?

Regardless of what you thought your primary value proposition would be, the only way to really define those terms is to see what characteristics keep people coming back the most.

When you are able to identify which feature makes users come back more often, the better you will be able to predict long-term retention.

By redefining your “active user” with real usage metrics, you build a structure that incentivizes you to build your product in the right direction.

Similarly, if you’ve identified groups of users who have unsubscribed, figure out what you can do to prevent new users from becoming them.

The more specific you are with the active user criteria, the lower the metrics will be, but the greater the knowledge of your product and what it needs to improve.

This tool can help you to track your active users:

Saas Active users

In summary,

How to define an Active user in a saas model:

  1. Determine the time period you are interested in examining (day, week, month…).
  2. Identify, define and measure the set of actions to be performed by a user
  3. Don’t put the cart before the horse, start simple and as you get to know your users, start specifying more. Don’t complicate the measurement before the time

I know we have said that not only the login is necessary… but don’t get overwhelmed, work with what you know at that moment and start validating, you have to start somewhere.

Metrics bring value, but too many metrics or a complex way of measuring them can block us and lead us to a “paralysis by analysis”.

This tool helps you define your key saas metrics and its very usefull if you don’t want to track everything in sheets or excel