7 Essential B2B SaaS Finance Metrics you must track in 2023

The SaaS world operates in cycles. The post-Covid era was defined by hypergrowth and abundant funding rounds. 2023, in contrast, will be defined by sustainable growth and a sharp focus on metrics and performance.

In order to drive growth, B2B SaaS enterprises need to create a culture of data-driven decision-making and put core business metrics at the front and center of their execution. In this macro-environment, finance teams in SaaS companies will play a major role in determining how this era of growth is defined for their companies.

In this article, we will discuss some of the most important SaaS metrics that finance teams should have in their toolkit as they lead their company to growth based on strong business fundamentals. We will break this article down in 3 parts:

• The 7 metrics you should be tracking
• What exactly should you do with these metrics?
• How do you get these metrics for your company?

The 7 metrics you should be tracking

1. Total MRR
   This is the total amount of revenue collected by your business from customers on a monthly basis. It includes subscription payments for the period that the customer has used the product within the month, as well as any recurring items like discounts, fees, etc. All one-off revenue items (like setup fees, etc.) are excluded from this metric.
   
   Total MRR reflects the fundamentals of your business: along with other metrics like churn, cost, etc. it predicts the health of your company at a given point in time.
   
2. New MRR
   This is the new MRR that was created in a given month through new subscriptions to the product/service that you are offering.
   
   New MRR is a key indicator of the growth of your company and is often also the most actionable lever for increasing overall revenue for the company.
   
3. Expansion MRR
   This is the new MRR that was created in a given month by the expansion of existing subscriptions through activities like account upgrades, free-to-paid conversions, and reactivations of previously canceled accounts.
   
   Expansion MRR is a good measure of calculating how well your company is able to counter churn and how your users are being engaged and activated within the product.
   
4. Contracted MRR
   This is the reduction in MRR in a given month as compared to the previous month. It includes cancellations, downgrades, and discounts.
   
   This metric allows you to represent the revenue impact of your churn. Focussing on this metric allows your company to better decide how to improve the experience for customers at the risk of churning - and address their issues around getting value out of your product/services.
   
5. Average Cost of Services (ACS)
   The average cost of serving one customer. This includes all costs after the acquisition of a customer, like support, customer success, infrastructure, etc.
   
   This metric helps you identify the major costs of serving and supporting a customer. This can allow you to optimize your product/services based on your financial goals, and also make key pricing decisions.
   
6. Average Revenue per User (ARPU)
   This is the total revenue generated by your company divided by the total number of users of your product/services, for a given month.
   
   ARPU is a component of your company’s unit economics. Reporting this metric along with ACS gives you a clear picture of how much you are earning and spending per user in your company.
   
7. Customer Lifetime Value (LTV)
   The total revenue generated by a customer over the life of their account.
   
   LTV allows you to draw a clear picture of how a specific customer contributes to your company’s revenue, it allows you to analyze whether costs like acquisition and maintenance of an account align with the value that it is providing to the company, as well as provide insights on what kind of customers are "high value" for your company.

What exactly should you do with these metrics?

Even though the key consumers of these metrics are the finance and leadership teams, at a time when fundamental growth is at the front and center of a company’s radar - the stakeholders for this information include all business teams, who need an accurate sense of how their efforts are moving the needle for the company.

Therefore, instead of reporting these metrics at the top level, they should actually be reported at the granular levels relevant to the growth teams and shared with them as an objective marker of the company’s requirements. Keeping key metrics at the center will help drive better decision-making in the company.

How do you get these metrics for your company?

One of the first questions in your mind is probably - “How do I actually go about doing this?”

Well, one of the first steps to allow your growth team to optimally use these metrics is providing accessibility. Modern-day ERP solutions usually create a silo of data that can only is not accessible by all stakeholders within the company: this makes the cross-functional collaboration of data difficult and usually creates bottlenecks for data teams to provide specific pieces of information.

This is exactly what Houseware intends to change. We believe that all data and metrics within an organization should be centrally calculated, managed, and be accessible to relevant stakeholders without additional effort. Instead of moving your data away to a specialized SaaS solution, we simply connect on top of your company’s data warehouse - its existing source of truth. Create your financial reports with the click of a button and share your metrics across the organization without any additional work.