Do You Really Know Your Business?
An insight on maximizing economic profits sustainably
An increase in revenue does not necessarily equate to a growth of the business.
Traditional business indicators such as the ‘Cash Conversion Cycle’ may paint a good picture of the business, but it does not give the whole picture.
Solutions like these allow the user to use professionally created solutions without worrying about the support or maintenance of it.
Why is it important?
A good SaaS metric will allow the business owner to accurately answer the following questions:
- Is the business economically viable?
- Is the business able to maintain its growth?
- Are our marketing activities effective?
- Are we creating or destroying value?
At this point, we know that SaaS metrics are critical in the longevity of a business. The obvious question at this point is: What SaaS metrics should be considered? Let’s dive in deeper into 4 SaaS metrics that give a deeper look in determining the profitability of a business.
Customer Acquisition Cost (CAC) - It is the cost of acquiring customers to patronize your business. CAC indicates the economic viability of the business model over a time frame. In the early stages of a business, customer acquisition is vital towards its longevity. Over longer periods of time, CAC will increase as businesses employ various marketing and promotional campaigns to increase their customer base.
Average Revenue per User (ARPU) - This metric indicates how much the customer spends each time they engage in business transactions with you. From this metric, you will be able to easily identify who are your loyal customers and who are your infrequent customers. With the right marketing campaign, businesses will be able to increase the ARPU of customers.
Lifetime Value (LTV) - A customer Lifetime Value is the projected economic value they will bring to your business. Increasing the LTV of a customer is five times cheaper than acquiring a new customer. With a proper loyalty programme, a customer’s LTV can be increased tremendously. This will also encourage customers to continue to come back and in turn will increase their LTV.
Customer Churn Rate - This metric indicates how much of your customers has left your services. As businesses continue to grow, the customer churn rate should be kept as low as possible. Like what was previously mentioned, it costs more to acquire new customers than to retain them.
However, the churn rate may not be indicative of the whole picture. To accurately identify the solution, the churn framework has to be fully understood:
- Which types of customers are susceptible to churn?
- Why is this customer segment prone to churn?
- Are there any deficiencies in this product/services being offered?
These are just four of the many SaaS metrics that are available to accurately assess a business.
Matching a solid SaaS CRM solution such as Beepmix with a strong business plan will enable businesses to develop the most beneficial strategy for its growth in these uncertain times.
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