Living And Learning In The SaaS Metrics Universe

How well do you understand your data? If you run a SaaS business you better have a good answer to this question. Its a truism but SaaS is all about data. Every step of the process is measured and tracked. Pipeline metrics. Growth metrics. MRR v ARR. LTV/CAC ratios. And all the rest. It is a are week when no-one posts a new measurement idea critical to SaaS success.
 
Many blogs and analyses are published by those who believe this enables a goal setting culture. Set the right targets for key metrics. Build sales and customer success teams that are accountable for those objectives. Establish clear quotas and incentives. Drive the business culture by focus on the right results and you will succeed.
 
This approach is favoured by a lot of entrepreneurs and investors with more experience in the startup world than me. Yet I think there is a different, better way. For me metrics are the voice of your business. Most important that also makes your numbers the voice of your customers. I prefer to listen to the data. Learn from what it tells me. And improve your SaaS using that knowledge.
 
The only trouble with this philosophy is that many people don’t know how to listen to their data. Even those with great numeracy and technical skills. Using and understanding metrics is a different skill from doing the calculations. You can read a fascinating and moving article about the common mistakes at “Beginner’s Guide To Data Based Thinking”.
 
So when you are faced with a mass of SaaS data, what can you do to understand what those metrics are trying to tell you?

• Focus and Prioritise. You need to pick out the numbers that are most important. This will vary according to the stage of your SaaS business. Growth in MRR is essential in the early days to get things off the ground. LTV is a better indicator of long term sustainable value. 
• Identify Patterns. As your SaaS grows you will have more data points to support each measure. Now the trends and direction will start to become clear. For example, LTV may be variable to begin with because your business has little churn. Once a pattern is established you can use this to identify areas to improve.
• Exceptions. Patterns are easy to spot once you have enough data. Exceptions are harder. Which point on the graph is an oddity and which a warning of danger ahead? Is one different data point an isolated example or the start of a new pattern? You can use ranges, bands of expected outcomes to help see the true exceptions. This helps narrow the field but can also make you blind if the range is wrong.
• Ask Questions. The most important key to listening. Metrics are a means to ask the right questions. No single number tells you the right decision to make. But any pattern or exception can lead you to a valuable truth. Your metrics are a way to probe and explore. Ask your team. Ask your customers. Ask your mentors. Find out more about the problem. 

 
Metrics are a gift for any business. We are lucky in the SaaS world that so many data points are available. The numbers are a guide to many unknowns. They can provide a picture of customer behaviour. Buying intentions. Churn signals. Growth trends. They can show the strength and weakness of every business. 
 
Learn how to use your metrics. Listen to them. Ask the right questions. Make better decisions based on the answers. Build a constant cycle of learning and improvement.