This lessons learned series is part of our live SaaS resource list we're building while launching a new product.
We've read up about SaaS metrics and we mention some internally but we rarely discuss some others like CAC and maybe because bootstrapped thinking is different to funded company thinking. The one thing that did surprise us is net revenue retention.
What one lesson about metrics was the most important and why?
A lot of the discussion around metrics applies heavily to funded companies. We're bootstrapped and have not looked to raise money.
We know, pretty much every single day, what we are earning and spending and that we have to earn more than we spend.
The lesson we learned is that many metrics are discussed in greater depth in companies where they have to consider their burn rate 18 months from now.
What's one thing we learned that made a big difference?
In the early days we thought in terms of numbers of clients and numbers of licenses per client.
For example we'd think "ok, this company wants 20 licences and that's $1,500 per month added to MRR".
We didn't think about how a massive increase in size of an existing client's purchase would be greater than signing up a dozen more companies.
We didn't think about the metric known as net revenue retention rate.
That metric matters a lot especially with enterprise clients and the underlying point is obvious enough. In a given month you could have 10 clients with two licenses each churn but 1 client expands from 200 licenses to 400. In this situation, counting clients gained or lost does not really tell you how well you're doing so look to that net revenue retention rate.
What would we advise someone to do if they were starting from scratch?
We can only (barely) advise bootstrapped companies on this. At first you'd probably focus on MRR and ARR but besides that we'd suggest focusing on NPS as one way to get feedback and your marketing funnel stats.
We don't think CAC and LTV matter a great deal when you barely know the market and the road map. It might even be misleading or some sort of comfort metric.
If we had a magic wand how would we use it to change our metrics?
Beyond conjuring up new clients we'd love to magic up the reason behind churn for every single client.
Churn is a big concern and the danger, in our SaaS business, is thinking we know why companies churn.
While we think they churn because they find they don't need this product, it might be because they were not onboarded correctly or ran into technical difficulties but didn't say anything. We'd love to lower churn and improve the product by understanding the causes of churn.
How will we use our experience for our new product?
We'll completely ignore MRR in the short term. Instead the focus will be on ease of use, activation, click throughs, NPS and everything related to the quality of the product (do they love it?) and distribution (are we making it easy for them to tell others).