March 30, 2014
Sales and Marketing Metrics for Early Stage SaaS Businesses

There’s been a lot of attention lately given to sales and marketing metrics for SaaS businesses.  As the co-founder of an early stage SaaS business, I struggled to initially decide which metrics really impact and drive our business.  Two of the blogs I frequently read to help out are from David Skok and Joel York.   In analyzing these different sources however, I’ve found it difficult to decide which metrics to focus on as related to stage of our company.  

Through trial and error, since our earliest days at Stackdriver, we’ve focused on a handful of metrics to help guide our business and help make more intelligent decisions.  Before I get into what we track, let me provide some background on who we are. 

We’re an 18 month old SaaS company, selling to business customers, with our product being generally available about 6 months ago.  Our sales model is 100% inside sales with a combination of lead generation from inbound marketing combined with outbound prospecting.  Our typical sales process is to move customers along a journey from education->demo->trial->close.  Our customers are primarily purchasing monthly contracts with about 10% overall signing up for 6, 12, or 24 month agreements. 

As we’ve begun to sell the product, the metrics that we’ve focused on measuring at this point are: 

-       MRR (Monthly Recurring Revenue) – I’ve focused much more on MRR vs. ACV given that we are mostly a monthly contract business. ACV will look bigger and nicer on a chart, but MRR is truly what defines the health of our business

-       Churn (customer loss) – I measure this both on a customer basis as well as MRR basis.  We typically like to focus on the metric that looks the worst, and in our case, its customer churn vs. MRR churn.  This is somewhat related to the fact that we have many startups as our customers

-       Organic Growth (growth from existing customers month/month) – this was a surprising metric for us in a positive way as our customers are generally increasing their spend month/month, however its too early to call trends in this category

-       CAC (Customer Acquisition Cost) – including all sales and marketing costs

-       SaaS Magic Number – somewhat early to call out a trend here, but I’d be open if you’re measuring this at a similar maturity stage as well

-       ASP (Average Sale Price) – I like to measure both overall MRR ASP as well as new customer MRR ASP.  The latter is important as our overall number is skewed by some early beta customers we converted to paying at a significant discount to our list price

-       Sales Cycle (time from initial customer touch to paying customer) – both average and median.  Again I like to measure the latter because we often have outliers which skew the average

-       Sales Conversion Metrics - we measure these both by lead source and by sales rep
          Activity->paying customer
          Lead->paying customer
          Demo->paying customer 
          Trial->Paying Customer

-       Marketing Conversion Metrics - again we measure these by lead source
          Lead->Paying Customer
          Cost per lead
          Email campaign open and click-through rates

These are the primary set of metrics which I measure at our stage of our business when it comes to sales and marketing.   In addition to these, we’re obviously measuring sales productivity, webhits, leads, etc  but those seem like a much more standard analysis regardless of size or maturity of company.  As we get more mature with our business including our freemium model, COGS rationalization, and churn trends, I’ll begin to measure new metrics like lifetime value, freemium conversion rates, etc.  I’d be interested if you’re at a similar stage and would be willing to share metrics for benchmarking purposes or if you have other metrics which you measure.  We’re a data hungry business so I’d love your input! 

Izzy Azeri is a Co-Founder of Stackdriver in Boston, MA.  You can follow Izzy on Twitter (@izzyazeri) by clicking here.