Focused

By Niall Maher

Customer Retention and Acquisition Metrics to Watch

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Customer Retention and Acquisition Metrics to Watch
By Niall Maher • Issue #25 • View online
“Discipline is choosing between what you want now and what you want most.” — Abraham Lincoln

Since most of the founders I work with run SaaS businesses, I compiled this list of what I think you should be tracking.
The number one thing is your MRR (Monthly Recurring Revenue).
You probably know your MRR since it’s something most founders are obsessed with.
Today I will focus on key metrics around customer retention and acquisition.
Customer Retention
Do your customers stick around?
The churn rate is a metric that tells you how effectively your business keeps its customers.
The two most important indicators to watch are Gross Churn and Net Churn.
The difference between Gross Churn Rate and Net Churn Rate is that the Gross doesn’t consider expansion revenue from the existing customer base.
Gross Churn
The percentage of total monthly revenue lost by cancellations.
(Downgraded MRR + cancelled MRR) / (total MRR at the beginning of the month)
Net Churn
Net churn is a critical indicator of the health of a SaaS business. It considers the MRR gained from expansions and upgrades from your remaining customers.
(Downgraded MRR + cancelled MRR - expanded MRR) / (total MRR at the beginning of the month)
Customer Acquisition
How do you find new customers?
How many unique visitors do you get every month?
Is it organic or paid traffic?
You can show you have a good plan by having another couple of key metrics.
CAC: Cost of acquiring a customer
How expensive is it to get a customer? How much do you spend on marketing and sales before a customer signs up?
The simple way of calculating this is:
Sales costs + marketing costs / number of new customers
I do recommend checking out this blog post by Andrew Chen for a much more detailed view of your CAC.
LTV (or CLV): Customer lifetime value
How much a customer is worth over the time they are a customer.
So for a SaaS business, this is relatively easy.
If a user pays €100 per month and the average lifespan of a customer is 12 months, we would say the LTV is €1200.
Blog picks 🎯
App of the week 🗓
End ❤️
That’s all for this week, have a great week ahead, and I’ll chat with you next week! 👋
If you want to say hello or get in touch, you can always reply to this email. 💌
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