metrics ratios business performance okr kpi financial

Metrics

Every industry has a set of common business metrics and ratios that management use as a gauge to determine their business performance These metrics are similar to the dashboard in an automobile or plane to monitor if the business is on track. Many companies refer to these as Key Performance Indicators (KPIs) or Objectives and Key Results (OKRs). 

There are many thousands of metrics that can be generated. However, only the key metrics will provide a balanced view of the business to guide management on which levers need adjustments.

Software As A Service (SAAS) Metrics

For Software SAAS businesses, the following metrics are important to monitor. 

  • Customer Lifetime Value (CLV),
  • Average Customer Lifespan (ACL),
  • Average Revenue Per Account (ARPA),
  • Monthly Recurring Revenue (MRR),
  • Annual Recurring Revenue (ARR),
  • Customer Acquisition Cost (CAC),
  • CAC:LTV ratio,
  • Customer Churn Rate,
  • Net Promoter Score (NPS),
  • Sales Cycle Length or the time taken to go from
  • Marketing Qualified Leads (MQL) to
  • Sales Qualified Leads (SQL) to Customers 

Business Metrics and Ratios – KPIs and OKRs

A different set of metrics may apply to other Non SAAS business.

Metrics can be financial or non financial. Metric quality trumps quantity. Accurate data is critical when computing metrics. Incorrect metrics can have disastrous impacts to the business. 

Investors and Management should track revenue growth and customer contracts . The MRR and ARR metrics depend on tracking bookings correctly. Once the bookings are in, tracking project implementation and go live dates are super critical to arrive at the correct reported revenue amounts. Lastly any customer churn should also be immediately updated as this impacts the future ARR value and can also impact cash flow down the road. Customer quality is something that needs to be closely watched. Accounts that churn or spin wheels results in high sales costs that cannot be recovered if the customers do not pay or have short CLVs.

Finance plays a key role to identify which areas of the business are working well and which need further improvements. Well designed metrics will immediately flag poor sales practices, production / delivery weaknesses or poor after sales service. Policy adjustments in different areas can help to bring the business back in equilibrium. Finance is a key business partner to analyze the situation objectively and prioritize the changes.

Ezee consultants have experience in multiple industries and can help to setup the right metrics within the company to help in profitable growth.

metrics ratios key performance indicators KPI objectives and key results OKR