The SaaS (Software as a Service) CFO’s Guide to the Top Customer Metrics in 2023

The SaaS (Software as a Service) CFO’s Guide to the Top Customer Metrics in 2023

Here is our take on the top customer metrics in 2023 from the perspective of the SaaS CFO (Chief Financial Officer).

The SaaS (Software as a Service) CFO’s Guide to the Top Customer Metrics in 2023
The SaaS (Software as a Service) CFO’s Guide to the Top Customer Metrics in 2023

SaaS CFOs (Chief Financial Officer) need to deal with lots of financial planning in an organization. They need to devote quality time to deciphering the activities that contribute to an organization’s profitability. This is where the role of SaaS metrics comes into the picture. The SaaS metrics can be divided into various categories based on the needs and requirements of a CFO, including: 

  • Customer Metrics: These metrics prove to be a blessing when it comes to an understanding the habits and tendencies of your existing customer base.
  • Recurring Revenue Metrics: These metrics help a B2B SaaS organization ascertain its long-term value measured in MRR (Monthly Recurring Revenue) or ARR (Annual Recurring Revenue).
  • Cash flow metrics: These metrics help a B2B SaaS organization optimize cash flows and improve efficiency.
  • Customer Economic Unit Metrics: These metrics prove to be handy in comprehending each customer’s value, behavior, and cost. It is measured in terms of LTV (Lifetime Value) and CAC (Customer Acquisition Cost). Customer economic unit metrics are a part of customer metrics. Did you know this?

Since this blog is all about the top customer metrics in 2023 from the perspective of the SaaS CFO, let us limit ourselves to it. 

Before we move ahead, let us look at the definition of customer metrics. 

What can be termed as customer metrics?                        

Those metrics that are specifically used to track the number of factors about your customers can be called customer metrics. Common customer metrics include customer satisfaction and loyalty measurements that directly relate to the B2B SaaS organization’s revenue growth and margin improvement.

Customer metrics are typically measured in terms of numbers by maintaining a scorecard summarizing the customer feedback results. A prime example of that is the average customer satisfaction rating regarding using a product or service. It is even possible to take the customer metrics one step ahead by measuring open-ended customer comments on social media networks through sentiment analysis.

Top customer metrics of 2023 from the perspective of SaaS CFO 

Here is a look at the top customer metrics of 2023 from the perspective of the SaaS CFO:

Customer count 

This metric informs you about the different types of customers that your organization serves. With the help of proper segmentation like enterprise, medium-scale, and SMBs, it is possible for you as a SaaS CFO to gain invaluable insights about the customers. This will help you understand their requirements better and scale up your product in a better way.

This metric can comprise of the maiden customers at the start of a fiscal year, churned customers, new customers, and net new customers (your new customers minus the churned customers). With the help of the figures derived, you can ascertain the performance of your sales, marketing, and customer success teams in a given budget year.

How can SaaS CFOs calculate this customer metric?

Customer count = Total number of customers acquired by the company in a specific period

Average Revenue Per Account (ARPA) 

ARPA is popularly known as ARPU (Average Revenue Per User). This metric helps you calculate the ARPA by accumulating all the MRR (Monthly Recurring Revenue) from a specific time and then dividing it by the number of customers within that same period. The result would be your average revenue per account (ARPA). How much easy does it get to evaluate your average revenue per account?

How can SaaS CFOs calculate this customer metric?

ARPA =   Total MRR from a specific date / Total customers within that same period

Net Promoter Score (NPS) 

This metric helps you adjudge the customer loyalty that can translate into future purchases and referrals. An NPS survey typically asks the existing customers what is their likelihood of recommending the company?

The scores are kept from one to ten (ten being highly likely to recommend and one being not likely to recommend). It is the best way to understand how your existing customers rate their experience after purchasing your products or services.

In the NPS survey, promoters are the ones who have rated your survey in the region between 9 to 10, detractors are the ones who rated your survey in the region between 0 to 6, and passives are the ones who rated your survey 7 or 8.

A negative NPS score reflects a glaring issue with your customer service team. A prime example of that is a delay in answering the customers’ queries and closing their tickets or holding the customers’ calls for a long time.

How can SaaS CFOs calculate this customer metric?

NPS = % of Promoters – % of Detractors

Customer Satisfaction Score (CSAT) 

Another useful metric for SaaS CFOs is the customer satisfaction score (CSAT). Although, in a single glance, NPS and CSAT might look similar as they solve similar issues of the SaaS CFO, there is a glaring difference between the two.

CSAT is measured after specific intervals of time. It can be done:

  • After a purchase deal has been made (to gauge the customer’s satisfaction level);
  • During the onboarding process (to evaluate the understanding level of the new customer); and
  • After a customer service exchange has been made to evaluate the performance of the customer service executives.)

Just like NPS, CSAT is calculated through a customer service survey. It uses the same scale of one to ten to understand the satisfaction level of the customers.

How can SaaS CFOs calculate this customer metric?

CSAT % = (#) of Positive Responses / (#) total responses X 100

Customer Lifetime Value (CLV) 

This metric helps SaaS CFOs to understand the total revenue that a company can expect from a specific customer over the business relationship. CLV is one of the most vital customer metrics that has been enlisted here. It also gives you a fair idea about the organization’s expenditure against customer acquisition.

When you measure the CLV customer metric as a SaaS CFO, it will help you to divert focus on your premium customers. Then you can work on providing enhanced value to those customers by providing valuable additions to your product features.

Also, as a SaaS CFO, you know that it is much easier to increase revenue from a loyal customer than to get it from a new customer.

If you find that your CLV is increasing over time, it means that your clients are happy with your products and services. So, they are more likely to continue with you for a longer span.

If your CLV is showing a declining trend, there can be two reasons:

  • either your product is not offering the value you promised, or
  • there is a breakdown in your customer success team.

How can SaaS CFOs calculate this customer metric?

There are two ways to calculate CLV

  1. CLV = ARPA / Churn Rate (make sure that both ARPA and Churn Rate are calculated monthly)
  2. CLV = (ARPA * Gross Margin %) / Revenue Churn Rate (for differing ARPA across the customer base)

Customer Churn and Renewal Rate 

One of the biggest factors that drive long-term profitability to a B2B SaaS company is its renewal rate. However, everyone in the SaaS industry is well-aware that 100% renewal is next to impossible. Customer churn is the harsh truth that CFOs need to understand. But, if the churn rate is unattended for a long time, it can be harmful for your organization. A prime example of that is a 15% churn on MRR when left unattended can grow to 45% in a matter of 2 years!    

To tackle this issue, you need to dig deeper into the root cause of the customer churning from your B2B SaaS business. It can be your pricing, features, UI, or even customer dissatisfaction. Either way, you need to understand the churn rate in your organization and then workaround to increase the renewal rate from there.

Customer Retention Cost (CRC) 

This metric helps you as a SaaS CFO to understand the amount of investment you need to make to maintain and enhance customer relationships. It considers all the costs involved in customer service and engagement, with the overall objective being customer retention.

CRC as a core represents the quality of your company’s relationship with your customers. It can give you a fair idea about the perceived reputation of the B2B SaaS company in the customer’s minds.

How can SaaS CFOs calculate this customer metric?

CRC = Cost of {Customer Success Team + Renewals and/or Account Management Team + Customer Engagement Programs + Professional Service & Training + Customer Marketing}

Final Words 

As a SaaS CFO, your ultimate objective is to ensure that all the customer metrics are calculated correctly. Once you calculate these customer metrics mentioned above for your SaaS organization, it will help you get the real picture of the revenue generated by your existing clientele. Thus, these customer metrics are worth like gold in the eyes of every SaaS CFO.  35

Start calculating these customer metrics in 2023 and get a real idea of where your business stands in the market! 

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