If you’re a subscription business owner, you know how critical revenue optimization is to your bottom line. Perhaps you often wonder whether you are offering the right subscription at the right time for the right price. Or, once you lock in those customers, how you will encourage them to stick around for the long haul.
It all comes down to the numbers for recurring revenue businesses. Metrics should empower subscription businesses to gain a better understanding of their customer base while keeping a close eye on the overall health of the business. So we wanted to know – what metrics are the most important for a SaaS or subscription based business?
Since Rev.io is the system that powers billing, we took a look at all of the top reports used by our most successful clients. Interestingly, we found a fairly clear trend on which reports are used on a weekly, if not daily, basis… and we want to share them with you. Here are five critical metrics to optimize your subscription-based business for the very best results.
Your MRR (or Monthly Recurring Revenue) is the average of your pricing plans and billing periods, normalized to a monthly total.. Additional MRR will typically stem from new customers’ purchases or current customers upgrading. Check in with this number often to determine what lead to the change over previous months and be sure to watch trending data. If you notice a decrease month-over-month, you may have a bigger problem with customer retention. MRR gives you a clear view of your revenue stream and will point you in the right direction for further optimization.
It may seem obvious but, without doubt, there is a correlation between increased billing errors and decreased customer LTV. Why? Modern customers expect flawless relationships with their service providers. One slip up on the back end could cause a lack of trust and eventual churn for recurring revenue businesses. There are plenty of service providers out there – make sure your customers have plenty of reasons to stick around.
Don’t worry, we’re not going to take you back to accounting class, but the status of your accounts receivable is critical for optimization. These numbers will give you an idea of the overall effectiveness of your collections department and help you determine whether action is needed.
For subscription businesses, bills are sent and collected on a regular basis, making AR a critical part of operational success. Rev.io’s AR aging reports shows each customer’s current balance, 30-day balance, 60-day balance, 90-day balance, 120-day balance, and total balance. Having all of this data in one place makes monthly reconciliation faster and more effective.
As your subscription business grows, you’ll start to turn your focus more to a customer’s LTV, the revenue a customer is expected to bring in over the course of their subscription. The goal of any recurring revenue business is to turn subscribers into lifelong customers, and LTV is the best way to track this long-term value. Increased LTV for a subscription business comes down to the product and the way you take care of your customers. Our integrated customer profiles make it easy to communicate and deliver with confidence.
Ready to optimize your revenue models at lightening speed? Don’t go at it alone – a powerful subscription billing system will give you all the insights and data you need to scale faster. Rev.io’s subscription billing platform allows you to easily customize and manage your service offerings so you can upsell and cross-sell smarter. Check back in for more tips to grow and optimize your recurring revenue or subscription business.