Metrics in a subscription business

When operating your subscription business, then subscription business metrics are used to propel improvements and help your business focus on what’s important.

Monthly recurring revenue

First and foremost it is important to look at your business’ Monthly Recurring Revenue (MRR). Whether you’re a start-up, an enterprise SAAS company, or a ballet school it’s important to keep an eye on your normalised monthly revenue. These subscription business metrics is a key indicator of the health of your accounts. It may seem obvious, but in the end, profits will derive from increasing your subscription revenue.

Sign ups

The number of new customers you are signing up in a month is a great indicator of the success of several of your business divisions. An influx of customer sign-ups can illustrate a triumph for your marketing team for example. Having sign-ups included in your subscription business metrics can also allow you to formulate an effective pricing schedule to combat stagnating new customer engagement

Churn rate

Your churn rate is simply the percentage of your subscriber base who discontinue your service. Keeping an eye on your churn rate really highlights what may be going wrong with your product, or perhaps with your service. Keeping a finger on the pulse of your disgruntled customers may also indicate what your competitors are doing – perhaps they are offering a superior or cheaper product, or an additional service you could think about implementing. It’s important that as well as finding out how many of your customers are leaving, you gather as much information as possible about why they’re leaving, by using cancellation tools it will help you to reduce customer churn rate.

Customer lifetime Value (CLV)

For your business that relies on subscription billing or recurring billing software, your Customer Lifetime Value (CLV) demonstrates the total revenue derived from a customer over the course of their interaction with your business. For your marketing and sales team, it can also act as an indicator for how much you should be spending to acquire customers whilst remaining profitable. There are many ways of calculating CLV however at the most basic level the lifetime value formula can be perceived as $MRR / Churn Rate. As a business it can be a really powerful presentation tool to apply the CLV to a Cohort Retention Curve. This curve illustrates retention data based on defined cohorts, so you can see how this changes with different groups of customers.

At Billsby we’re all about subscription business metrics – get in touch to see how we can help you scope out metrics for your company.