The SaaS Business Model & Key Metrics: Key Drivers for Success

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When you run a SaaS business, having the right metrics in place becomes crucial for a stable financial future. If you search for ‘SaaS metrics’ on Google, you will come across over 100 different metrics to measure the performance of your business.

Be it Venture Capitalists, PE investors, CEOs, or Venture Partners, everyone has their own set of SaaS metrics, such as likes, web traffic, revenue, etc. So, how to figure out if your business is doing good? Like, what do we look at? This dilemma is faced by many!

In this blog, we’re going to walk you through three metrics. Metrics that actually matter! They can help you figure out if your SaaS business is on the right path to success or if there's something you really need to fix. By keeping a close eye on these metrics, you will be able to accelerate the growth rate of your SaaS business.

Grow your SaaS businesses faster with an unstoppable strategy

Be it any SaaS company, in the early stages, most of them juggle with spreadsheets. They keep working on various metrics and still feel clueless about the areas they are going wrong. But, when you look at the right metrics, you actually get to know what you need to fix!

Metric# 1: How many leads are you generating? 

While all other metrics are important, how much traffic you’re generating for your website matters a lot. Understanding the percentage of your website visitors to leads is super important and essential.

 Likewise, keeping track of the percentage of leads becoming real activated trials or sales opportunities should be a part of your success strategy.  

Figure out if they are putting in their email or downloading your content, or going directly into the product and activating the trial period. 

What is considered a healthy percentage here?

Well, if you're actually targeting the right group of people, anywhere between 10 percent and 20 percent can be counted as good enough. This is the first metric that you need to use when moving from traffic to leads. Besides focusing on targeting the right people, you should also ensure your messaging and manifesto is right.

Metric# 2: How many actually got converted into real sales opportunities?

The second metric that you need to look at is, out of those people that may have downloaded your manifesto or went with the trial offer, how many of them turned into real activated trials or real sales opportunities. When someone downloads your manifesto, there is no guarantee that they're going to sign up for your product!  

Likewise, if your SaaS business is more product-led, and in case the manifesto leads into the product, it can be considered a real sales opportunity only if these two scenarios are met:

  1. They are activating the product 
  2. They are using the product

So, the key takeaway from metric number two, is: what percentage of people of the leads are actually becoming sales opportunities? 

Typically, anywhere close to 10 percent is a real benchmark. That feels quite low, right? Well, that’s why generating a lot of traffic and getting a lot of leads is crucial. Moreover, this figure can be higher in the initial stages, but as you scale, it can start dwindling!

Metric# 3: How many of them are converting to revenue?

Once you start having sales conversations with leads who’re actively using the product, you need to ask yourself, what percentage of them are converting. In this stage, usually, we see a 20 percent conversion rate. This is the benchmark! 

In some cases, it can be even higher. For example, if you're getting hot inbound leads, the conversion rate can be as high as 50 percent! In fact, it can scale up to 70 percent if your SaaS business is in the super early stages. But again, as your business grows, it will come down to 20 percent. So, it’s crucial that you hit the benchmark consistently. 

It may happen that you’re generating a lot of leads but the conversion rate looks dismal. Chances are high that you are either generating wrong leads or your sales process is messed up. That’s why the third metric becomes so important. 

When you start to calculate the conversion rate of the traffic to the leads, you can fine-tune your traffic to make it more relevant. Likewise, when you keep a close eye on leads to the opportunities & trials phase and you have a benchmark for the same, you can enhance the quality of your leads. 

When you look at these metrics every single day, for weeks, your go-to-market strategy gets better and better. You get quick at closing problems. No matter if you’re having an ICP problem or activity-related issues, you can figure them out proactively. And this is all that matters because this is what really tells you, whether you are headed for success or not! 

If you're not generating quality leads and you're not converting, that means you need to check if the traffic is good enough. If the conversion rate is decent but the revenue still looks unimpressive, then probably there's something wrong with your traffic or sales process. So you can make decisions on what to do, and that's why these three metrics matter so much. 

Fine-tune your sales funnel to generate optimum results!

So now that you’ve metrics to measure, how do we actually scale up the volume of leads or how to ensure we’re generating the right leads? Well, there are three things to focus on.  They can make your sales funnel more effective. The first one is your ICP (Ideal Customer Profile), which determines who you're really targeting. Manifesto is the second one, which is basically your messaging. It helps you understand how to target them. And the third one is your consistent set of sales and marketing activities. 

Final takeaway!

So, these three metrics can make your sales funnel more effective and measurable. Plus, they are a pretty scalable way to grow a SaaS business. Once you implement and incorporate these three pieces, you can impact these metrics. And if one of them is broken, you'll be able to figure out which one of these you actually need to iterate on. 

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