In 2022 there has been a slowdown in VC investments, we already know that this excessive growth is no longer demanded, but now, “the new sexy is profitability”, so here will talk about Saas Efficiency metrics. If before, profitability was already key for the sustainability of a startup, without a doubt, 2023 will be “the year of efficiency”. Therefore, here are some actions on Saas efficiency metrics that I have been working with some startups. Actions that can help you to have a more sustainable company.
How optimize customer acquisition cost(CAC) of a SaaS:
- Don´t analyze the Caac with aggregated data, calculate the different Caac in search of inefficiencies. Calculate the Caac at each stage:
– Cost per Lead(CPL).
– Cost of user acquisition (Caac user) in freemium or free trial models.
– Cac Sales: Cost of acquisition taking into account the sales team and the tools they use. For – example Hubspot, if shared with marketing apply a % to each department.
– Cac Marketing: Acquisition cost taking into account the marketing team, ads and tools.
– Cac Campaign: Cac taking into account only marketing campaigns.
Cac Effiency Saas
sales efficiency ratio saas
- Focus on profitable channels, but if you have a runway, keep a little budget to test campaigns, don’t put your startup into hibernation.
- Analyze your sales funnel for inefficiencies. A 1% improvement in one stage of the funnel can be significant.
Saas Efficiency metrics: Customer actions
- If they don’t pay, on day 1 we cut the service, it’s hard, but hard times are coming. Enterprise is another league…
- Check your gross margin and make sure you are attributing items where they belong: – Do you have onboarding or initial set up? Remember to include the percentage of time spent by your customer support team in the margin, even in the Cac. – Are you using Google cloud or AWS but not yet paying for servers because you have perks? Estimate the cost as if you don’t have them, to analyze the feasibility.
- Review your pricing plan: – Simplify pricing, no more than 3, help the customer to choose. – Try upgrades. – Change the price of everyone you can: increase the price, reduce the use of existing discounts. – Measure Mau(monthly active users). Analyze which customers are not using your product. It pays me month to month and even if I don’t use it, it’s cool. Wrong, if someone does not use your service, sooner or later he will unsubscribe. Call them and ask them why they don’t use it. You can redirect the situation or learn from the mistake. – Check your customers and their economics according to your different pricing plans. You should take control of your customer data efficiency saas
Focus on retention. Analyze churn, upsell and downgrade.
Saas product efficiency
- Focus on the features that bring the most value to your users, and don’t develop new ones. Rethink your roadmap.
- Monitor the reportings tickets and try to answer them at least within 48 hours.
- Monitor bugs and response time of your app.
Review your freemium model
Review your freemium model. Ask yourself:
- What maintenance cost (servers, customer service,…), does your freemium model have?
- What percentage of users do you manage to convert into users? What is your Lifetevalue and arpa?
Remember that freemium is free for them, not for you.
What is the payback (time it takes you to recover the investment of attracting these users) of freemium users?
Saas operational efficiency metrics: Extend your runway
- Review your cash flow and see that what you have in the bank matches your projections.
- If you still have enough cash and you have good numbers, look into bank financing. Now, when you need it, the bank will not give it to you.
- Ask your partners for a new contribution to extend your runway.
- Close convertible notes with those who were left out in your last round.
- Before contracting, consider whether it is strictly necessary. Many times this need comes from an inefficiency in some process. A metric that can help you keep your feet on the ground is the euros generated per employee = ARR / Total full time employees (without interns).
- Adjust your Burn Rate
- Burn Multiple: A metric that funds are looking at a lot to measure efficiency that consists of dividing the money we burn each month by the net new revenue we are able to capture.
Saas cashflow financial metrics
Forget Averages. They only serve to deceive oneself, metrics such as projections in excel, can be manipulated to show what we are interested in showing.
A VC asks you for retention and the last few months it is not very good. Very easy:
- Roll up an average of the last 6-12 months.
- Pull metrics with a cohort of users that is in your favor. But this, in the end, is lying, both to the fund and to you, and it doesn’t usually end well. A relationship is based on trust.
Review all your metrics. Forget about making your metrics pretty and analyze your business by cohorts.
TAKE ACTION, ANTICIPATE.
And you know that if you have any doubt, I can help you here: