Metrics I use to track Growth

When I first got into SaaS, I was sweating. What. Are. These. Acronyms. No one warned me about the …CAC, MAU, ARPU…(WTH). Fast-forward to now, here are the important growth metrics to track.

I thought I’d share a quick guide on the important metrics to keep an eye on.

Valuable insights emerge when we explore how various metrics interact with one another. 

Think of it this way: a solid acquisition strategy loses significance if most users leave shortly after joining. Likewise, impressive user retention won't translate into revenue if you're not consistently acquiring new users.

The power of a Growth Engine lies in the collective influence of these metrics and their interconnections. This is why it's imperative to focus on a few key metrics at each stage of the growth journey:

Insights emerge when we explore how various metrics interact with one another.

The power of a Growth Engine lies in the collective influence of these metrics and their interconnections.

It's important to focus on a few key metrics at each stage of the growth journey:

→ Acquisition
→ Activation
→ Retention
→ Referral

Let’s dive in:

1. Acquisition

Website:

• Traffic/website visits: number of users visiting your website.

• New/Returning Visitors: How many people are visiting your site for the first time versus those who are coming back? It helps gauge if you're attracting fresh visitors.

• Time on Page: average time a user spends on a single page. Doesn't always have to be lengthy, but a very short time may indicate a lack of interest.

• Bounce Rate: percentage of users who visit your site and leave after a few seconds, A high bounce rate means no resonance and you didn’t hook visitors.

• CTR (Click-Through Rate): This metric gauges the proportion of users who click on specific links, typically calls to action, compared to the total number of page visitors.

Conversion:

• Demo bookings: number of leads who scheduled a walkthrough of your product to see its functionality, helping them better understand its value.

• Sign-ups: number of new users who sign up to try you out or purchase a plan.

• Conversion rate: The percentage of trial users or leads who convert into paying customers.

• Time to convert: The average time it takes a user to make a desired action after their first visit. The faster you convert, the better it is.:

Financial:

• CAC (Customer Acquisition Cost): It indicates the cost of acquiring a new customer. Ideally, our CAC should consistently be lower than our Customer Lifetime Value (LTV), but there can be exceptions depending on our strategy.

• LTV (Customer Lifetime Value): The total value a customer brings during their entire relationship with the business.

• LTV/CAC (Customer Lifetime Value to Customer Acquisition Cost): This ratio compares how much a customer is worth over time to what it costs to get them. It's crucial for creating a sustainable acquisition engine.

• Payback Period: How long it takes to earn back the money spent on acquiring a customer. A shorter payback period means you can reinvest faster.

• Month-over-month acquisition growth: This reveals the potential to scale and the interest it's generating. If strong, it shows the company is gaining momentum and on the way to growing substantially.

2. Activation:

Here, the objective is to guide leads into becoming actively engaged users who continually find value in your product over time. Monitoring usage metrics becomes instrumental in achieving this.

• Activation Rate: This measures the proportion of users who've reached their "aha" moment – when they understand your product's core value. Keep in mind, that this moment is unique for each product.

• Time to Value: It's the average time it takes for users to reach activation. Faster activation is vital to retain users in their early stages; slow activation leads to drop-offs.

• DAU/WAU/MAU: These acronyms represent Daily, Weekly, and Monthly Active Users. While attracting users is great, the real value lies in keeping them actively engaged. Inactive users won't generate revenue.

• Average Session Duration: the average time a user spends in a single session. The ideal duration varies by product, but it's crucial for engagement and revenue. 

• User Actions: These are specific actions users take within your product, customised to its features. It's all about gauging user engagement – closely monitoring these actions.

• Feature Adoption: what portion of users actively use a specific feature in your product? It's a strong indicator of feature success, especially when introducing new ones.

3. Retention: 

In this context, the goal is to maintain and nurture users who have already found value in your product, ensuring they continue to do so over an extended period. Keeping a watchful eye on retention metrics plays a vital role in achieving this objective.

• Churn Rate:  percentage of users who stopped using the product. When analysing churn, determine its source: it's crucial to determine the reasons behind it—whether it's a natural churn (external factors causing users to leave) or a churn due to issues with the product.

• Time to Churn: how long it takes for users to turn - the average duration (days, months, years). The longer they stay, the better. 

• Retention rate: the portion of users/customers who stick with the product over a specific period. You can measure retention daily, weekly, or monthly depending on how often your product is used.  You can look at both revenue and product use to gauge it.

• Repeat Purchase Rate:  the percentage of customers who return for additional purchases. Selling to existing customers is often more cost-effective than acquiring new ones. A strong repeat purchase rate can enhance your financial performance.

4. Revenue

In the Revenue stage, the focus is on enticing users to make the purchase on a plan. It's about nurturing the customer journey and converting visitors into paying customers. Keep a close watch on your sales volume and revenue growth.

• ARPU (Average Revenue per User): calculates the average revenue generated per user. It's derived by dividing your total revenue by the number of users.

• ARPPU (Average Revenue per Paying User): Similar to ARPU, it focuses on revenue per paying user, excluding free users.

• Trial conversion rate: the percentage of users who upgrade from free plans to paid subscriptions.

• Lifetime Value (LTV): the total revenue earned from a single customer throughout their entire relationship with your product.

• Gross Revenue: This is the total income generated from sales before any deductions.

• Net Revenue: the amount left after covering all business expenses and deductions.

• MRR (Monthly Recurring Revenue): Predictable monthly income from subscriptions.

• ARR (Annual Recurring Revenue): Sum of predictable annual income from subscriptions.

• New vs Existing Revenue: Maintaining a healthy mix of revenue from new and existing customers is essential for sustainable growth.

TL;DR

It's crucial to understand that multiple metrics are interconnected. The key to success lies in recognising how these metrics interact.

Acquisition involves website visits, bounce rates, and conversion rates.
Activation measures how quickly users find value in your product.
Retention focuses on keeping users engaged over time, while Revenue is about converting visitors into paying customers and tracking financial performance. Understanding and optimising these metrics is essential for growth.