MBA1012 8 Essential Metrics Every SaaS Should Track P2 + Free Ride Friday!

Hey there listener. Today is Free Ride Friday, so make sure you hang on to the end of the episode to hear who won this week's Free ride. Every Friday we give away a lifetime membership to one of our programs. This month we're giving away easy course, our 30 day course on how to build your own online course. You can check it out at EasyCourse Co. It's a $500 value, but we're giving it away for free to somebody who's left us an itunes rating and review. So if you want to win, just leave us an itunes rating and review and you enter our weekly random draw and you're automatically part of the draw every week. Once. You leave us a review once. All right, let's jump into today's episode. Hey O. Welcome to the Hundred Dollar MBA show. Because your business is not going to build itself. That's why we deliver daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher, Omar Zenholm. I'm. I'm also the co founder of the $100 MBA, a complete business training and community online over at 100mba.net and today's episode is part two of our two part episode on the eight essential metrics you need to track as a SaaS business. We covered the first four in part one, so if you haven't listened to part one yet, hit pause and listen to part one yesterday's episode first because all this is going to make a lot more sense. Don't worry, I'll be here when you're finished. But if you're all listened up, then we're going to cover the next four metrics you need to track as a SaaS business, as a software, as a service, or any reoccurring membership business that charges monthly or annually. We're also going to tie this up in a bow, recapping all eight and how to really focus on making it all work together. We're going to go a little bit more high level in this episode. The first four metrics were pretty basic, pretty essential, like the bare bones. We're gonna geek out a little bit more in today's episode, but in a good way. So let's get into it. Let's get down to business. One of the first things you got to do when you start a business is acquire a business address. You need it to register your business. You need it to open up a business bank account. You even need it to register for email marketing. Yes, you need an address on the bottom of your email marketing newsletters. But if you work from home like a lot of us do, you don't want to put your home address and have your customers show up to your door. And you don't want to spend the extra money every single month on having a business office. This is where Earth ClassMail comes in. They hook you up with a swanky business address and all the mail that gets sent there gets scanned and uploaded to your account in the cloud. That means you never have to check physical mail ever again. You could see it anywhere, anytime from your phone or your laptop. Pretty cool. So cool. We signed up. We absolutely love it. And we've been using Earth ClassMail for over a year now. And EarthClassMail wants to hook you up with a free month so you can get started with your business address. Just go to earthclassmail.com mbamonth and use coupon code MBAMONTH. Again, that's earthclassmail.com MBAMONTH coupon code MBAMONTH. So in yesterday's episode, we covered the first four metrics you need to track as a SaaS business. The first, the first one was unique. Monthly visitors. Number two were the leads that you generated via email opt ins. Number three were the signups. These are people that have sign up for your service, whether it's a free trial or a demo or whatever, but they're not customers yet. And number four, of course, our customers, the number of customers that actually convert that actually get charged. All right, metric number five, and you guessed it, mrr, your monthly recurring revenue. This is the amount of money you actually make every. Every month. So you might have a hundred customers, but some customers are charged $5, some are getting charged $20, some are getting charged $100 a month. This is the total amount of money that you actually make that month. When I say make, that's the revenue. We're not worrying about costs right now. We're not looking at profits. We're looking at the revenue you make, the amount of money that comes into your business every month. Now, this is a very important metric. This is probably the number one metric every SaaS business looks at or, or is the most frequent metric they look at. It's kind of like their barometer of like how well they're growing, how much money they're making. But here's a little secret. Just looking at your MRR and nothing else is kind of useless. Yeah, you could see if the number's going up or down, but then you're kind of helpless. You need to know how to actually influence that number and that's where the other metrics that we covered in the first episode, part one of this lesson yesterday really come into play because this is where I can actually increase my mrr. If I increase my customers, I can make more money. But not only that, if I want to increase my mrr, I can also increase prices. That's the fastest way to make more money. I can also try to get more people to convert to annual or upgrade their account to the next level. There's all different kinds of things I can do. But you need to track it so you can be able to know how to tweak it. Now the easiest way to track mrr, the kind of the no brainer way, is to just look at your payment processor. Stripe makes this very easy to see your monthly recurring revenue. But if you're using in a more advanced tool or an easier tool to use like Baremetrics. Baremetrics.com Big shout out to Josh Pickford, the founder. He's a good guy. I know him personally and their tool is very, very good. So let's track that mrr. Let's write that down. And remember in episode one I gave you homework on tracking everything with a spreadsheet. So you have a fifth column. Now you got to put MRR and you got to plug in that number of the MRR wherever you get it from stripe or from barometrics or whatever. So that way we know where we're starting. Remember, we're going to track things in snapshots of a month every month. So you want to choose a date in the month and plug in that number. It could be the first of the month, the last day of the month, whatever you want to do. This is important because you want to compare apples to apples. You want to make sure that you're comparing MRR from the first of the month of last month versus this month. Your MRI will fluctuate day to day. So really, MRR is not something you should look at every day. It should be something you look at every month. So we talked about the money that you're making. What about the money you're losing. And that's metric number six, that's churn. Now, often churn is described as customers that leave your subscription. So this can include cancellations, but remember, this is cancellations after they become a customer. Don't get this confused. If they cancel while they're on trial, that's not churn. They haven't become a customer yet. Churn is money you're losing. You didn't make that money in the first place. Yet Churn is often measured in a percentage. So your Churn rate can be like 8%. That means 8% of your customers or total customers that you get every month have churned, have left. Now you might be saying, oh man, that's bad. But your percentage of new acquisitions might be higher, like 15%. So you're pretty good at. You actually have a growth of what, 7% now. Churn is something you want to keep under control. You want to lower Churn as much as possible. And every business is different. Every kind of software is different. Depending on how sticky your software is. That means how hard it is for a customer to leave your software. Some software are more essential to somebody's business than another. Some software have monthly plans. It's easier to churn on monthly versus annual. You get the point. Churn is another thing that you can track with something like Bare metrics again, and it's a percentage. We want to plug that into our spreadsheet and track Churn because we're going to do a whole bunch of things in our business to lower Churn. So we have a Churn number now for this month. How are we going to lower that for next month? Well, we can improve our onboarding. We could take a look at our systems at customer service. We can find out from customers why they're canceling and fix those problems. It could be a price thing, it could be a compatibility thing, it could be the software itself or the ui. These are things we need to find out so we can lower Churn. Alright, number seven, number seven mention we're going to follow is lifetime value, customer lifetime value. This is a number, a dollar amount of what you actually can get out of each customer for their lifetime value. The predicted amount of money that you can make. This also includes how much you've already made from this customer. So say for example, you have a customer that is on an annual plan and they just renewed their annual plan. And your annual plan is about $400 a year. So you've made 800 bucks. That value is a lot for that customer. You want to make sure that you increase the lifetime value of every customer because that's really kind of your assets. Every customer is an asset. That's really how much money you're making from each customer. If you can sign them up for a two year contract or a two year deal, that's going to increase your lifetime value for that customer. And hopefully for all customers it's if they can accept that deal. Lifetime value is really what you want. You really want to get as much as you can from each customer. Of course, you're giving them value in exchange. So you're not like you're stealing from them. Of course not. We're all ethical, great business people here. Right? But the point here is, is that that's how you can really measure the growth of your business long term, the sustainability of your business. And it's actually a big part of the actual value of your business. If you wanted to sell your business today and you can show your you have a very, very good lifetime value customer lifetime value. The buyer is going to say, yes, this is a great business to buy because they've already proven they can hold on to great customers that are willing to pay. Again. This is a metric that you can track with baremetrics.com if you're wondering if there's any alternatives. Yes, there are other alternatives. You can search on Google. I know there's another one called ProfitWell. It's not as detailed as barometrics, but they'll give you some of these basic metrics like lifetime value. So this is another cell we're going to put on our Excel sheet, on our Google sheet, whatever you want to use, and put the lifetime value number. Now we're going to look at average lifetime value for every customer. This is the number we're looking for here because every customer will have their own lifetime value. But we want to look on average, how much does each customer actually provide for our business over a course of their membership? And we want to increase that. And we could do that by, you know, getting them into bigger plans, longer plans, maybe moving them from monthly to annual because that, remember, monthly is great only if they pay every month and never cancel. Annual locks them in and gives you more lifetime value. All right, we got one more metric that I want to cover, and it's my favorite one, actually. We'll get into it in a moment, but first, let's give love to today's sponsor. Support for today's show comes from Microsoft Teams. Microsoft Teams is your hub for teamwork in Office 3. Here at the $100 MBA, we run a remote team, so we have teammates all across the world. And sometimes communicating can be quite hectic. Organizing everything from chats and emails and files, it can get chaotic. With so much to look after, it would be great just to have everything in one place. And that's what Microsoft Teams does. Teams is a single workplace where you can work, share and connect with the people in your work life. Teams brings together chat, meetings, files and apps all in one place. Take Teamwork, where you work with apps for mobile and desktop. So whether you're sprinting towards a deadline or sharing your next big idea, teams can help you and your team achieve more. I recently used teams and I found the user experience to be so simple and clean, I found it like stress reducing. So I tip my hat to Microsoft Teams for building such an easy to use app. Microsoft Teams in Office365. Visit office.com teams to learn more. All right, metric number eight that we're going to cover in our SaaS business is a combination of two previous stats we were covering. And I like to have the stat separate and keep my eye on it always. And that's monthly unique visitors versus monthly customers. I want to know what percentage of people that visit my website for the first time every month become a customer. Is that 3%? Is that 5%? Is that 10%? If I have a thousand unique visitors every month and I get 50 customers, that's 5%. So I'm going to take my two numbers that I got from the first spreadsheet, make an equation which is basically unique visits over customer number and get a percentage. This is a number I like to look at a lot because this allows me to really tweak my website, my sales copy, try new videos, try all kinds of things, try my opt ins, you know, improve my opt ins because some people really focus on traffic. If I get more people to my website, I'll get more customers. Yes, but it's a whole lot easier to increase conversions with the customers that actually come to your website. So if you get a thousand people that come to your website, a thousand new people that come to your website, and you take your normal percentage of 5%, become customers and increase it by 10%, you just doubled your customers. So increasing the conversion rate by improving your website, your copy, your communication, what leads them to become a lead and then a actual signup and then a customer really makes a difference. It all starts with the website, like I said. And this little metric allows me to play with conversions, allows me to manipulate and test things and split test and find out what increases that number if I can follow that number every time I make a change. So say for example, I make a change to my website one month and that number goes up. I know that I'm doing something right, I'm on the right path, but if it goes down, I can, you know, obviously go back to the original, you know, thing I had before I changed it and make a different direction, make a different change. In a different direction. So there you have it. Those are the eight metrics. Let's recap real quick. Number one, unique monthly visitors. Number two, leads. Number three, signups. Number four, customers. Number five, MRR monthly recurring revenue. Number six, churn. Number seven, customer lifetime value. And number eight, unique monthly visitors versus customers. This is it. These are the core metrics. Now, there are other things you can track. There's other things you can look in. You can look at your customer service and see, you know, your average response time or the number of tickets. But these are kind of the things that you look at to improve, to improve these eight essential things. If you get these eight essential things in order and you're constantly improving them, your business is going to be in great shape. And the best way to start is just to track this. Simply keep it simple. There are other software out there that you can create these fancy dashboards with all these fancy equations and you can plug in your different apps and you can see everything. But if you just start with a simple spreadsheet, it's at least a start. At least you have your first month numbers in front of you. That's why I gave that assignment at the first episode or part one of this episode yesterday. Once you kind of have those numbers and you're working on a spreadsheet, you want to get fancy, you want to use a software, you want to have a fancy, you know, get go board or whatever it's called, go ahead and do that, that's fine. But often if we put the cart in front of the horse, we spend too much time trying to choose the fancy software and not enough time pulling the metrics out of our system. So let's pull the metrics out first so we get the ball rolling. All right, thank you so much for listening to part two of this lesson on the eight essential metrics to follow in your SaaS business. This lesson may be over, but the episode is not. Because today is free ride Friday. I got to give away a lifetime membership to one of our courses. We do this every Friday. If you want to win, just leave us an iTunes rating and review and you enter our weekly random draw. This month we're giving away easy course, our 30 day course on how to build an online course. It's the $500 course that we sell on ezcourse co, but we're giving it away for free to somebody who left us a rating and review. Let's see who won this week's free ride. And the winner is Tikifan 39 Tiki Fan 39 says so encouraging 5 stars I'm pretty new to this podcast, but I really enjoy it. It's not too long and it's packed with honest, practical business advice. And it's presented in a no nonsense personal style. Omar seems to know exactly what I need to hear about entrepreneurship at the right moment. Well, thank you Tiki Fan 39. You are our Freeride Friday winner. Your mission is to email me at omar00mba.net so I can hook you up with the free ride to Easy course. We do this every Friday, so if you want to win, leave us an iTunes rating interview and you enter our weekly random draw. Thank you so much for listening. That wraps up today's lesson. Before I go, I want to leave you with this. The best way to accomplish this task getting your metrics in order is to allot a couple hours in your calendar. Just block book it and just follow along what I just taught you in this two part lesson. Create your spreadsheet. Extract the numbers from your tools I mentioned and pop them in the spreadsheet. You'll feel so much better once you've done it after the two hour session and there you're set up for month after month. From there you just plug in the numbers from there on in. All right, all the best with your SaaS business. I'll check you. In Monday's episode we have a very special guest lesson by Clay Clark. He'll be teaching you how to increase your sales by 300% in 30 days. I'll check you then. Take care.