So you built a SaaS product. Great! But now you have to sell it, and if you’re just getting started there can be a number of metrics that can seem dizzying to a first time entrepreneur. To make sure you’re covering all your bases, read below to find the 9 critical sales metrics you should be tracking from day one.
1. Lead (or MQL-, SQL-, Opportunity-) Velocity Rate (LVR)
What it is: Whether you call them leads, marketing qualified leads (MQLs), sales qualified leads (SQLs), opportunities, or anything else under the sun, this first number represents the new potential deals you could bring in at any one moment. Take that number, and examine how it grows over time, and that’s your Lead Velocity Rate: the rate at which produced leads grow month over month.
Why it’s important: Jason Lemkin extols it as the most important metric in SaaS for a number of reasons. The main reason is that some leads can take a long time to close, but if you are consistently increasing your lead count, your sales growth will tend to track lead growth even if you stumble a little bit on winning sales the short term.
How to find it: To find your LVR, take the number of leads produced this month, minus the number produced last month, and divide that by the number produced last month.
2. Lead/opportunity to customer conversion rate
What it is: Once you’ve found your LVR, the next step in predicting your customer growth is the conversion to customer rate. Again, whichever metric you might use to represent a potential deal, the rate at which those will become customers is a simplified version of your overall conversion rate.
Why it’s important: If you think back to your LVR, your conversion rate is where your sales team comes in. If leads are growing at a consistent rate, and you can keep your conversion rate steady, you’ll be able to accurately predict revenue quarter over quarter.
How to find it: the simplest way is to take the number of customers you signed in a time period and divide it by the number of leads you generated in that same time period.
Depending on your conversion funnel, you can get more granular by calculating conversion rates between steps (e.g. lead to opportunity) to see where you might make improvements. Note: if you have a longer deal cycle, it may be more accurate to divide the deals closed in one period by the leads generated in a much earlier period than just before. This will more accurately reflect the quality of those leads and the success of your sales team.
3. New Monthly Recurring Revenue (MRR) & Growth Rate
What it is: Monthly Recurring Revenue, or MRR, is a critical metric for any subscription-based business. Simply put, it’s the amount of money you bring in every month because of subscriptions. The growth rate in MRR therefore is the rate at which your recurring revenue grows, month over month.
Why it’s important: MRR has become a benchmark of success for many companies, because it can predict the path to cash flow positive and profitability. SaaS subscription models became so popular because if you sign a customer, you can safely assume you’ll be generating a reasonable amount of revenue month over month. When you add a customer to your base you’re growing that recurring revenue stream, and that’s your growth rate.
How to find it: The simplest way to find MRR is to take the number of customers and multiply it by the amount of monthly revenue they generate for your business. There are a lot of great apps out there, including Chart Mogul which plots your MRR and growth rate and helps you easily predict growth.