In recent years, more and more businesses are open to the internet tools, services, and internet infrastructure and purchasing (or, more accurately, renting ) SaaS services. From online invoicing, customer management, and lead generation through CRM to lease servers.
So What’s SAAS?
SaaS – short for Software as a Service. If in the past we needed to purchase local software and use it locally, today a lot of software can be used with a web interface available to all and any computer or mobile device and usually costs much less.
SaaS can be seen as a form of outsourcing software services, applications, and infrastructure. For example, instead of wasting precious time and money building a landing page and talking with a designer and programmer, you can rent one of the SaaS services, a system built on online landing pages. You can create your landing pages quickly and easily for a monthly fee of usually a few dollars (depending on the extent of the system used). Additional examples: Google placement test tools, CRM system, cloud, heat maps and analytics, virtual chat websites, and so on.
Here are a few names of the largest SAAS companies today: Salesforce, Linkedin, Workday, DropBox, Asset Bank, Service Now, New Relic, Zendesk, and more. Here you can see the list of 250 of the biggest SAAS companies.
Many startups that are growing recently are built on the SaaS business model measuring profits, and their customer churn rate growth is known in advance.
So which SaaS startup concepts do we have to know?
MRR – stands for Monthly Recurring Revenue. The intention is that the monthly business cycle makes the customers its subscribers. MRR growing every month signifies growth.
ARR – The same principle goes for Annual Recurring Revenue, meaning annual income returns.
ARPU – Stands for Average Revenue Per User. This means what the average income is (a customer who purchased a particular package). The calculation is simple: MRR is divided by the number of active customers. Usually, low ARPU shows the work with small clients and not with enterprises. Each company aims to increase its ARPU as much as possible without losing users.
USER CHURN – abandonment rate according to users. The calculation is: (the number of customers who have canceled / number of active clients in the previous month) multiplied by 100. This figure SaaS companies are aspiring to lower as much as possible, as well as the following figure
REVENUE CHURN – abandonment rate according to profit. The calculation is: (Decline in MRR because of cancellations and downgrade packages/MRR of the previous month) multiplied by 100.
LTV – Stands for Lifetime Value. This concept means how much money in total the average customer is worth to you. The calculation follows ARPU divided by User Churn. For example: If a user pays on average 50$ in a month and the User-Churn is 10%, then the LTV is 500$.From here, the company will cut how much it can financially invest in getting a customer.
CAC – Stands for Customer Acquisition Cost. In other words, what the cost is to get a customer. This cost can include the cost of employing sales workers, marketing and advertising costs of all types, and so on.
Do you want to see all this data live?
The startup Baremetrics (SaaS) is developing an analytics system for SaaS companies that work with certain payment providers and present them with the data mentioned above and many others. Moreover, in a visually beautiful and simple way. So, You can see the actual data of Baremetrics or SaaS companies on their websites.
