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7 Essential SaaS Marketing Metrics to Boost Business Growth

Software as a service called SaaS is a practice where software applications are leased over the Internet. Customers or businesses

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Software as a service called SaaS is a practice where software applications are leased over the Internet. Customers or businesses that use SaaS gain from scalability, low maintenance and cost, security, and ready-to-use software. A report says that 31000+ SaaS firms operate globally, and the market will grow to 900 USD billion by 2030. Consequently, marketing of SaaS products and services is a challenge. This blog examines the seven essential SaaS marketing metrics to boost business growth.

SaaS Metrics

SaaS metrics are benchmarks or key process indicators that help measure a firm’s business performance. These benchmarks cover revenue and finance, customer, and market reach. Agencies such as Benchmarks have reviewed the performance of 1000+ SaaS firms and defined certain numerical values for the indicators. These metrics are generally accepted by SaaS firms, though they are not mandated by any Federal agency.

7 Essential SaaS metrics

While there are several, the important group of seven SaaS metrics is discussed as follows. The values are specified for the worst and best performers of four quarters for 2024.

Customer metrics

Customer acquisition cost (CAC) is the expenses spent procuring a new customer. The expense head includes sales, overheads, marketing, and other costs. It should be the least and is calculated as the total costs divided by the new customers brought in. The current benchmark for best performers is USD 0.24, and for worst performers, it is USD 3.00.

The CAC Payback Period is used to measure the days or months needed to get back the amount of CAC. For worst performers it is 48 months and for best it is 2 months.

Customer lifetime value – CLTC to CAC ratio is the revenue expected from a customer over the engagement time. The worst performer is 1.0 and the best is 10.0.

Marketing Net Revenue Retention Rate

Also called NRR, it is the percentage of funds obtained from customers from the initial transaction period after subtracting expenses. It is calculated as the revenue retained at the start of a period plus the expansion RR for the same period, subtracted by any reduction in revenue minus the canceled revenue, divided by the revenue at the start.

This metric is important since it gives revenue that can be predicted as inflows from ongoing transactions rather than one-time sales and new customers. Firms with low NRR show less customer satisfaction and lower value proposition. For the worst performers, it is 25% and for the best ones, it is 100%+.

Customer churn rate – CCR is the percentage of existing customers leaving. The best performers have <5% and the worst have 50%+.

Marketing Operational efficiency

Gross margin is the revenue resulting after deducting the cost of goods and services sold. It shows the extent of profit and it should be high. Top performers have 98%+ while the worst ones have less than 15%.

Company growth rate evaluates profits, and new customers in a year. It is the percentage of value in current period less the value in the previous value. It is defined by churn rate, the rate of all growth, and helps to make expansion, investment or reduce them. Worst performers have -33% while best performers have 375+ %.

Earnings before interest, taxes, and amortization – EBIDTA evaluates the financial outlook of a firm. It is calculated as the EBITDA divided by the revenue. Worst performers have -100% while best performers have 50%.

Burn multiple and hype factor

Burn multiple is the rate of cash burned by marketing before profits are seen. Number of dollars spent for every USD obtained as revenue. This metric helps as an early warning for new firms that keep on spending without any revenue. It is calculated as the product of net burn to the new net annual recurring revenue – ARR. Best performers have 1 rate and worst would have 3-4. The burn rate can be higher if the growth rate is high.

The hype factor measures the efficiency in converting funds raised into annual recurring revenue. When funds are not used to generate revenue then they are used to create marketing hype through ads and events. It is the product of capital raised divided by the ARR. Best performers have 1-2 hype factors while worst performers have 5+.

Bessemer Efficiency Score

A new metric, the Bessemer Efficiency Score helps to measure the marketing objectives, desires, and hopes of a firm. It is the net new ARR divided by the net burn. It measures the new ARR for every dollar used in the net burn. The metric examines the efficiency of growth for the SaaS firm. The assumption is that growth in the long term is sustainable and steady while a short spurt of growth will not last. Worst performers have a value of less than 0.3 while better have 1.5+.

Marketing Human capital efficiency

Annual recurring revenue – ARR per employee helps to measure productivity and efficiency. It indicates the revenue that is annually recurring divided by the number of staff. Best performers have a value of USD 0.3 million for an employee and bad performers have USD 10k+. A high value means understaffing and overwork, and a low value shows low staff utilization.

Sales and marketing ratio to revenue is the percentage of expenses related to sales and marketing revenue earned. The best performers have 1% while the worst are 200%. Older firms have stable ratios while stat-ups invest more.

General and administrative expenses or G & A is obtained as the expenses divided by the revenue obtained. Worst performers have a ratio of one hundred while the best ones have 1%. Lower values indicate a stable company.

Marketing Capital Efficiency

The average annual profit divided by the investment helps to evaluate profitability. It is used to ascertain the return obtained from investment. Best performers have an 8.00 ratio while the worst ones have 0.00.

The metric, Rule of 40 is used to find the marketing performance of a SaaS firm. Higher scores indicate good operations. Best performers have 100%, and worst performers are -100%.

Free Cash Flow Percentage helps to understand the efficiency of operations and the financial health. It is calculated as the free cash flow to total revenue. The worst performers have a ratio of -100%, and the best ones have 50%.

Conclusions

The blog examined seven essential SaaS marketing metrics to boost performance. Seven metrics covering customers, finance, marketing operations, marketing capital efficiency, Burn and Bessemer scores were examined. Values were given for the best and worst performers. Some of these are covered by finance and operations; however, they are defined and driven by marketing operations. It is clear that these metrics are not mutually exclusive but intricately related and depend on each other.

SaaS firms have a large marketing budget, especially in the initial stages. This budget must produce the desired financial performance. As an example, customer acquisition cost can impact the NRR, ARR, and other indicators. If the acquisition costs and NRR are high, then it leads to faster cash burn. If the CCR is high, then the marketing revenue is reduced.

These relations focus on marketing operational efficiency. A high marketing spend with lesser conversions and retention means that the efficiency is low, and marketing is not directed to the right segments. While new customers are needed, the cost impact of servicing is important.

Since metrics cover finance and HR functions, all departments must work together. A stable company balances marketing costs and revenue. A high budget with reduced returns is not good marketing. Every SaaS Development Company concentrates on improving the service levels of existing customers.

Therefore, it is better to gather all the metrics, identify the weaker ones, and make changes in the strategy used for marketing.

Author Name:- Harikrishna Kundariya

Biography:- Harikrishna Kundariya, a marketer, developer, IoT, Cloud & AWS savvy, co-founder, Director of eSparkBiz Technologies. His 14+ years of experience enables him to provide digital solutions to new start-ups based on IoT and SaaS applications.

New Global Minimum Tax Plans Are Still Under The Clouds

The global minimum tax has been a hot topic in the business world as of late. While the concept is

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The global minimum tax has been a hot topic in the business world as of late. While the concept is not new, the Trump administration’s proposal for a minimum tax on multinational corporations has caused quite a stir.

The current debate surrounding the global minimum tax is two-fold: first, whether or not such a tax would be effective in leveling the playing field for businesses; and second, how high the tax should be set.

Supporters of the tax argue that it would close loopholes that have allowed companies to shift profits to lower-tax jurisdictions. Opponents argue that the tax would be passed on to consumers and would stifle innovation.

The reality is that no one knows exactly what will happen if a global minimum tax is enacted. However, the uncertainty is weighing on businesses that are trying to plan for the future.

In this blog post, we will explore the pros and cons of a global minimum tax and what it could mean for businesses around the world.

What is the global minimum tax?

The global minimum tax is a proposed tax on multinational corporations (MNCs) that would require them to pay a minimum level of tax regardless of where they operate. The proposal has been put forward by the OECD as part of its Base Erosion and Profit Shifting (BEPS) project and is currently being negotiated by member countries.

The global minimum tax would address the problem of MNCs using cross-border strategies to minimize their taxes. For example, a company might shift profits from a high-tax country to a low-tax jurisdiction through transfer pricing or other means. The global minimum tax would ensure that MNCs pay at least some tax on their profits, regardless of where they are generated.

The details of the global minimum tax are still being worked out, but it is expected to be applied to both corporate income taxes and capital gains taxes. It is unclear how high the rate will be, but it is likely to be set at a level that will raise significant revenue from MNCs.

The global minimum tax is controversial, with some countries arguing that it will unfairly burden businesses and stifle economic growth. However, many countries support the proposal as a way to level the playing field between MNCs and domestic companies, and to raise more revenue from multinationals.

What are the implications of the global minimum tax?

The global minimum tax would have far-reaching implications for businesses, both in terms of the amount of tax they would pay and the way in which their taxes are calculated.

The global minimum tax is a proposal by the OECD to harmonize corporate taxation around the world. The thinking behind the proposal is that multinational corporations are able to shift profits to low-tax jurisdictions, eroding the tax bases of countries where they do business. The global minimum tax would put an end to this race to the bottom by setting a minimum rate that all countries would have to apply to their corporate taxpayers.

The main implication of the global minimum tax for businesses is that it would increase their tax bill. This is because most companies currently pay taxes at rates below the proposed global minimum. In addition, the way in which corporate taxes are calculated would change under the global minimum tax regime. At present, many countries allow companies to deduct certain expenses when calculating their taxable profits. Under the global minimum tax, these deductions would no longer be allowed, meaning that more profits would be subject to tax.

The impact of the global minimum tax on businesses would depend on a number of factors, including the final rate that is set and how countries choose to implement it. However, it is clear that it would be a significant change for many companies and could have a significant impact on their bottom line.

How would the global minimum tax impact businesses?

The possible introduction of a global minimum tax is weighing on businesses, as the uncertainty around the plans makes it difficult to prepare.

The concept of a global minimum tax is that multinational companies would be taxed based on where their consumers are, rather than where they are headquartered. This would level the playing field and ensure that all companies pay their fair share.

However, the details of how this would work are still very uncertain, and businesses are concerned about the potential implications. For example, it is not clear how different countries would implement the tax, or how it would impact existing tax treaties.

This uncertainty is making it difficult for businesses to plan ahead, and many are delaying investment decisions until there is more clarity. The global minimum tax could have a significant impact on businesses, and it is important that policymakers carefully consider the implications before moving forward.

What is the status of the global minimum tax proposal?

The status of the global minimum tax proposal is uncertain. The proposal, which would require multinational companies to pay a minimum tax on their profits, has been under discussion for years. However, progress on the proposal has been slow, and it is unclear when or if it will be finalized.

The global minimum tax proposal has been criticized by some business leaders, who argue that it would unfairly target multinational companies. They also argue that the proposal would make it more difficult for businesses to operate internationally.

Supporters of the proposal argue that it would level the playing field between multinational companies and domestic companies. They also argue that it would raise revenue for governments around the world.

The fate of the global minimum tax proposal is uncertain. It remains to be seen whether or not it will be finalized, and what impact it will have on businesses if it is enacted.

Global intangible low-taxed income

It’s no secret that the prospects of a new global minimum tax are weighing on businesses. With so much uncertainty surrounding the issue, companies are understandably hesitant to make any definitive plans.

However, there is one area where the impact of a global minimum tax could be felt very soon: global intangible low-taxed income (GILTI).

Under current law, GILTI is subject to a special rate of tax that is significantly lower than the standard corporate tax rate. This preferential treatment has been a key driver of corporate inversions and other transactions designed to minimize taxes.

If a global minimum tax is enacted, it’s likely that GILTI will no longer be taxed at such a favorable rate. This could have a significant impact on businesses, particularly those with significant overseas operations.

Of course, it’s still early days for the proposed global minimum tax, and many details remain to be worked out. But businesses would be wise to keep an eye on this issue, as it could have a major impact on their bottom line in the future.

Conclusion

The global minimum tax is still up in the air, but it’s already having an impact on businesses. Some companies are holding off on making major decisions until they know what the tax will be, which is creating uncertainty and weighing on the economy. It’s still too early to say definitively how the global minimum tax will affect businesses, but it’s something that we’ll all be keeping a close eye on in the coming months.

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