SaaS business cases have many moving parts, but fortunately all Saas companies can rely on the same metrics to know how well it is performing. These are the actionable metrics which matter most to achieve sustainable and accelerating growth:
Let’s break that down:
These are my number 1 and 2, because your whole business growth will accelerate almost automatically if you can achieve net negative churn, as described here: What is Net Negative Churn in SaaS - The SaaS CFO.
These two metrics are easy to track and are actionable:
This line of thinking will also challenge you to measure (and price) on the actual value which you deliver to customers.
A minor change in churn will have a tremendous impact to the other key metrics:
The ratio between these two metrics matters as well:
I’ve seen many founders make mistakes calculating both CLTV and CAC:
If you do this right you get to two other key metrics:
All these metrics are actionable. You might have to increase prices or shift to a different price plan altogether in case you can’t make the CLTV/CAC ratios work. It might even mean a shift in strategy.
The calculator is a single form which you can fill out. It contains up to 30 parameters to produce a cost benefit analysis for your business case. You can calculate your return on investment (ROI) in a few minutes.
It needs only a few basic parameters to get started, such as a selling price of your product, the number of customers you expect and such items. You can keep it either very simple or make a very sophisticated cost benefit analysis.
Although SaaS businesses revolve around a few metrics, it can get complex fairly quickly. For instance:
We've noticed that a correct calculation which factors in all these effects can become cumbersome to figure out.
The Business Case Calculator has automated all these calculation to produce reliable outcomes. You can add up to three price plans in the calculator, which is the common amount of price plans SaaS companies tend to offer.
It also allows you to include additional revenue based on usage on top of the subscription price of a price plan. This can be helpful if you expect to bill your customers for some additional use, for instance if they have to pay some premium for additional users, processing messages, storing data or similar usage components.
You can best use this calculator to produce an ROI calculation of a marketing, sales and or product investment. If you anticipate to get more customers by investing 100k in marketing, this calculator allows you to justify that investment (or not). You would have to consider how such an amount is spent and how long it takes before the investment materializes into new customers. You can do that by using a warmup period. This is because you might not get all the new customers within the same month you've invested your marketing budget.