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SaaS Metrics Glossary

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[responsive]SaaS Metricsd Dictionary[/responsive]

Gartner defines software as a service (SaaS) as software that is owned, delivered and managed remotely by one or more provider. SaaS removes the need for organizations to install and run applications on their own computers or in their own data centers.

The most common metrics for SaaS companies:

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Conversion Rate

The percentage of users who take a desired action. The archetypical example of conversion rate is the percentage of website visitors who buy something on the site. This could be seen as the reason why conversion rate optimization has become a popular way to turn visitors to a website into customers.

Conversion Rate = New Customers ÷ Total New Signups

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Churn Rate

The percentage rate at which SaaS customers cancel their recurring revenue subscriptions.

Churn Rate = Lost Customers ÷ Customers Beginning of the Month

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MRR – Monthly Recurring Revenue

Monthly Recurring Revenue (MRR) is normalised monthly revenue, based on all recurring items of a Subscription.

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MRR churn rate

The revenue that has been lost from customers cancelling or downgrading their plans.

MRR churn rate = Lost MRR ÷ MRR beginning of the month

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ARPA – Average Revenue per Account

Sometimes known as Average Revenue per User or per Unit, usually abbreviated to ARPA, is a measure of the revenue generated per account, typically per year or month. The total revenue generated by all customers (paying subscribers) during that period should be divided by the number total number of customers.

ARPA = MRR end of month ÷ Customers end of month

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ARR – Annual Recurring Revenue

The amount of recurring revenue a subscription-based company will collect in one year.

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CAC – Customer Acquisition Cost

The cost associated in convincing a customer to buy a product/service.

CAC = Marketing spendings + Sales spendings

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Months to recover CAC

Is a measure of time that demonstrates how long you take to recover the amount of money invested on customer acquisitions (CAC).

Months to recover CAC = Total CAC ÷ (MRR end of month ÷ Customers end of month)

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CLTV – Customer Lifetime Value

The amount of revenues that you expect to generate from a customer during the period over which your service will be of value.

CLTV = (1 ÷ Churn Rate) X ARPA – Average Revenue Per Account

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Cash flow

The movement of money into or out of a business, project, or financial product. It is usually measured during a specified, limited period of time.
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