MicroConf On Air MicroConf Refresh Episode 17: Staying on Top of Your SaaS Metrics_Knowing What to Measure (& What Not to) to Help Maintain Sustainable Growth - Craig Hewitt
Knowing of which metrics to track, and which to ignore, is an essential part of growing your SaaS business. The ability to filter out good, actionable, data from the ever-present noise that just distracts you is what separates many successful businesses from the ones that never get off the ground. By creating a system of how you can collect, review, and take action on the data in your business you'll be able to take action with confidence that your business is going in the right direction.
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Transcript:
Rob Walling: Thanks for joining me on this week's MicroConf refresh episode of the MicroConf podcast. We are continuing our journey through the building, your first SaaS ultimate crash course, playlist. That playlist has received rave reviews on Twitter and from folks contacting us. So if you haven't watched the talks, you can always head over to youtube.com/MicroConf to see the visuals today's talk is from Craig Hewitt.
It was given in 2019 at MicroConf Europe. It's called "Staying on Top of Your SaaS Metrics". Know what to measure, to maintain sustainable growth. It's an exceptional talk. And here's how Craig describes it, knowing which metrics to track and which to ignore as an essential part of growing your SaaS business, the ability to filter out good, actionable data from the ever-present noise that just distracts you is what separates many successful businesses from the ones that never get off the ground by creating a system of how you can collect review and take action on the data in your business.
You'll be able to take action with confidence that your business is going in the right direction. And this is one of 10 talks in the playlist that covered things ranging from finding an idea to launch and early growth to outbound sales, to customer support, onboarding, and playing the long game, staying sane while you're starting up.
Hope you enjoy it.
Craig Hewitt: Hello everyone. I think I've met many of you, and a lot of familiar faces, so it's good to be here. it's an unenviable position to be right after lunch. On the second day, people are. Tired or hungover. we're gonna have a lot of, interaction here. if you have questions, you can stop me. We don't have to have questions at the end.
but what are we talking about today is SaaS analytics, and SaaS metrics that you need to watch and those that you don't, cause I think running a SaaS business, which I guess show of hands who runs a SaaS or subscription and business. Awesome. Good for you. and who attracts their metrics like every day, every week, every month, Cool.
Okay. We're going to talk about all this. so that's cool. SaaS metrics are fun. there we go. But it's the second day right after lunch. And so what's really cool is how we can grow our companies faster by paying attention to our metrics because metrics by themselves aren't really that important. so who, again, show of hands. Who's happy with their current growth rate, who has a positive growth rate, I guess we'll start with that.
Yep. And who's happy with it. Right on. Cool. That's not unexpected. Okay. after your talk right there. Cool. so I think what we're going to say here is instead of just this nebulous to grow and I want to grow my business, let's put some values around that. So metrics and narrowed down this whole huge field of like marketing and sustainability to something that's a little more, tangible and that we can affect better.
one son just started judo. He's seven and it's not my son, but, I think, this, this Bruce Lee quote is really cool because it dispels like the arrival fallacy, right? The rival fallacy is that when I get to 10 K and I quit my day job that I'm there. Or when I have a team of 10 people and I don't have to be working in the business every day, I can work on the business that everything will be sunshine and rainbows uniforms.
and it's not true, right? Because you're never there. We're all at this conference because we want more out of our businesses and this fulfillment that it gives us personally. and I think talking about metrics, it's the same thing. We are never going to be there. We're never going to be happy.
And so you just have to get cool and comfortable with being unhappy and run your business this way. So who has seen something like this and all the marketing world? Yep. Cool. top of funnel, middle of funnel, bottom of funnel, the idea is just get a bunch of people aware of your brand and your content, and then you work them through this funnel by educating them about the problem that your product solves.
and then hopefully. Oh, is this not working? Okay.
everybody hear me. Okay, cool. I'm like double fist in here. And then convert them at the bottom of the funnel. And so this works really well. This is pretty traditional. I think some people are starting to dispel this a little bit with instead of funnels, they're using loops and cycles.
but the idea is really that you start at the top with something like awareness and then increase, awareness of a problem. And then the solution that your problem, your product presents and more information about your product itself and how it's different from others. And then hopefully convert these visitors or trial users into paying customers at the end.
We're going to touch on this down here a lot more later, but this is, something that's really popular in the marketing world these days about the five stages of a customer journey. So I think that this model is Shortsighted right. As business owners, if you're a marketer, then this is cool.
Cause this is all you care about. But as a business owner, this tells like from a metrics perspective, maybe half of the story and what I really like to break it down to is acquisition and retention. because they're the two parts of the business. One is getting people into your world and into your funnel and then converting them.
And then you got to keep them around, Because. There's a very pop I'm part of the tiny seed cohort of a very famous saying now from one of the tiny seed folks, INR that he says, I hate your churn. and because churn will absolutely wreck your business. And so INR hates everyone's churn, even if it's really low, like we're fortunate to have a cast dose.
you have to pay attention to both sides of the point, right? You have to pay attention to awareness and acquisition and trials and all this good stuff, but you also pay attention to things like lifetime value. And turn, we'll talk about both sides of this because they're really important. so from an acquisition metrics perspective, this is like the world, right?
And this is like all we really care about, seeing things like from the very top of the funnel number of people come to your website. and the way we like to think about this as we'll talk about, how we evaluate our metrics and how we can change them in the future. but just the very beginning is like how many people are coming to your website?
From there, it goes down the funnel to say like, how many trials do you have started? That's cool. And then once that ratio, so what is the trial to visitor ratio in your business or for your funnel? And then from there you say, how many new paying customers do I have every month or whatever. and we talked about that in terms of MRR usually.
and then what's that trial to paid conversion ratio important. and then something else that we think about is like, how much does that cost, How much can we spend on AdWords or Facebook gods or a marketing person or content writers all super important because you can't be paying more to acquire customers than they're worth, in the long run.
And then the last one, which is super hard, but, if you can figure it out is channel attribution. So where are you getting people from? And then how much does that cost, from each channel? On the re on the retention side of things, that's like after someone becomes a paying customer, how long did they stay around?
So we talked about revenue churn. We talk about customer lifetime value, and average revenue per user. So on a monthly basis, how much does the average person you and then the big one is cash in the bank? because all, I think the day that's all of it, All distances really about is like, how profitable is your business?
How sustainable is it? So we don't want to happen as this. And that's why I like to think about acquisition and retention, because you don't want to put a bunch of resources and time and money and stuff, and the top of the funnel or in the top of the bucket, just for it to leak out the bottom. And so we're going to run through a couple of examples and I'll ask your opinion on Hey, look, let's look at this business.
Is this good? Or is this bad? but the way that we kind of solidify, this is with a scorecard. and this is not my unique idea. This is from a book called Traction by Gino Wickman. Who's read Traction. So there's two tracks and books. Rob talked about one yesterday. It's not the marketing book. It's the how to run a business book.
Yup. Everyone else should read it like this week. it's the book on how to run a business, from a really macro it's if you read the E-Myth it's E-Myth. They already got the unit 2.0, it's the EMAC 3.0, it's like for grownups, how we should run our business. So he has this idea of a scorecard.
Everything that really matters in your business is too much for all of us think about. So you solidify it down and concentrate it into one piece of paper and it's your scorecard. So it's all of these SaaS metrics. And then for the business, whole it's things like cash in the bank and receivables and all this kind of stuff, depending on your business, you're a scorecard will change, but you have to have.
A place to look at this on a regular basis, that's easily accessible and you can track over time. So how and where do we track our metrics? a lot of subscription folks here will use something like ProfitWell or biometrics. That's cool. That's a piece of it. Something like Google analytics also super-important amazingly free.
and then a product usage tool like amplitude and mixed panel. There's a handful of others out there. Heap. and then we got to put all this information somewhere. So we put it in things like notion, which is what we use for like our communication tool, or in base camp or in Google. She threw a little drive.
So how often to track your metrics? There are definitely people who look at ProfitWell every day. I am Craig. I look at profit. every day I obsess about it. and that's cool. you should look at some things every day. You should look at some things every week and you should look at some things every month.
and so we'll talk about what we do, and you can take this for what it's worth. so on a monthly basis, we write a, and we did this before we joined tiny seed. We write a kind of narrative, a letter to our friends and advisors and people that I know and respect in the space. And now we write it to Robin INR and the folks at tiny seed to say, Hey, this is how we're doing.
and we include all of this stuff in that letter. and say, here's our MRR, here's our churn. Here's our booth. Here's our open meeting. Here's our CAC. Here's the number of new trials that we'd started, on a monthly basis because these are lagging indicators, right? You're not going to go do something.
I guess, James, talk dispel this a little bit. You're not going to go do something that affects churn on like a weekly basis, right? This is a longer term thing to affect these numbers. So that's why I only report these once a month, because if you look at churn, Or ARPU on a weekly basis, you'd be like, yep.
The same as it was last week, if your business anything like mine on a weekly basis, we look at a lot of the marketing and acquisition type things. So we look at website visitors, new trials, what that ratio is trial to paid conversion ratio. and we try to look at channel attribution because these are things that are really fluid and dynamic and are changing hopefully all the time.
If you're having an active marketing group, all of this stuff should be changing all the time. So we track this. I'll show you how in a Google sheet. And we look at it all the time, and hopefully these numbers are changing on a weekly basis and that tells us that something is happening and hopefully that's good.
and then on a daily basis, we look at basically ProfitWell, and look at how many new trials we had started yet. Yesterday. We look at what our MRR is today, and we look at the number of new paying customers we acquired since the last time we looked at yesterday. And so you might be saying, Craig sounds like a pain, right?
but it doesn't have to be right. So we, we automate a lot of this tools. ProfitWell automatically do a lot of this for you. Thank you, Patrick. but for the really marketing kind of metrics, there's not a tool other than Google analytics that does this in a really cool way. like data studio from Google, I think makes us in a really nice format.
but we do is we automate the collection of all this into a rule sheet with a free ad on Google sheets. Everyone should be taking a picture of this. That's amazing. so you install this ad on for Google sheets that pulls automatically select Google analytics reports into a Google sheet for you. So you don't have to go into Google analytics all the time to look at your stuff.
And so this is a screenshot of what this looks like. we have a couple of things here, like users. This is unique website visitors. Then we have two goals in our business. One is, when somebody starts a new trial. And then when they become a paying customer and these are custom goals and Google analytics that we've set up.
And so it pulls this into a spreadsheet that I gave the first version of this to Denise on our team. And it was horrible and she made it very pretty like this. And this is, these are our metrics from the last month or so. And I don't have to do anything. I just have this Google sheet book marketing, and I go look at it once a week, right before her and I have a one-on-one call.
So I look at this and I say, Great. This is working. This isn't working. This is where we should focus our efforts. This thing we just started is awesome. Let's do more of it. and so we started doing this who knows this folks from the U S maybe know this, I don't know if this exists in Europe. Yep. What's the name in this game?
Yes, we play scorecard whack-a-mole so the idea here is you look at your scorecard, at least from our perspective from a marketing. lens. We look at this and we say, this number is great. This number is great. It's number sucks. Let's go get this number, And you work on this number until it doesn't suck anymore.
And so we play whack-a-mole, I, this is not my kid. I wish that would be great if this is my kid, but this is not. But, yeah. And so this is like a simple way to look at the whole of your marketing world and just say, let's do. The one thing, that's the worst right now. And we'll talk about leverage in a minute because that's really what this is.
It's what's the absolute worst thing that we can affect that will make a big difference in our business. So what, So yeah, that sounds great. And so the, so what is that your metrics should be, should guide your growth strategy. And so I think this slide sounds like really obvious, but I hope we can shed some more light on what this looks like from a practical perspective in a minute.
Let's be Lumberg right. And talk about some TPS reports. And so this is where the audience participation comes in. so we're a SaaS business doing 10,000 a month and we have an average revenue per user, 50 bucks. I'm very jealous of. and so let's consider a couple of scenarios. so this is the first scenario.
I'll give everyone a minute to digest this, the CC at sign up. So they're requiring credit card signup. Withdrawn talked about yesterday. The vast minority, so looking at this, I think this is a pretty typical, like early stage SaaS application. What is the mold that we all want to whack?
Yep. So the number here that we like to look for is like 2% awesome. 1% is, okay, this is not good. So you're doing a fair amount of work maybe to get 2,500 visitors a month almost nobody's turning into a trial. Trial customer or trial Byler. and then the rest of it is I think pretty good.
The one that's really sweet here is LTV of almost a thousand bucks. That's awesome. so let's look at scenario two, also with credit card, sign up. What's the most that we want to whack here? Yep. 10% churn. We replace all of your customers every 10 months. Yeah. Give me anxiety just thinking about it, What's that fresh energy, right? It's after lunch on the first day. On the second day. Yeah, we've got some energy. And so it leads us to like our rule of thumb, right? Rules of thumbs are very, flexible things, but this is like my rule of thumb. And I will see if anybody agrees with it. If you're trying to bake conversion ratio is greater than 35% with credit card up front or without credit card was greater than 15%.
And your revenue turn is less than 6%. Then you have just a top of funnel. You need more people on your website. If it's worse than that, you need to focus on retention and you probably don't have product market fit. Everybody cool with us like failing. This is, yes, this is no. Okay. I, this is what we go by.
and we are solidly in the category up here right now. We need just more people in our world. So that's a pretty cool place to be. You're a developer. Your product is awesome. Your messaging on site aligns with that. And the people that are signing up are expecting to get the value they get. So moving on to no credit card signup, which is where we are cast us now, we don't have a hundred thousand website visitors a month or 10,000.
That would be, Oh no, we do it. We don't have a hundred thousand. so where's the kind of ugly mole here that we need to whack.
Yep. 6%. this is rough, right? You're getting a whole bunch of people onto your site. They're starting a trial and they're saying your thing's horrible. I've never going to pay you money. There's also like Rob talked about yesterday, the onus is on you and you don't have credit card up front to prove the value of your product to those trialers.
and this is something we're getting used to. It cost us right now. We required a credit card up front for the first two and a half years. So a lot of the onus is on in marketing to say, Hey, our thing is so full, right? And they put the credit card in and they just convert after two weeks. Now, the onus is on us to convert those people, during the trial period.
How about the last scenario here? Also? No credit card upfront.
So the rest of this is great, right? Visitor to trial to pay churn. I hate your turn, right? 6%. Okay. It depends. But I think 6% is okay. And at this point, this is rule of thumb number two, and all the developers in the room, which is like almost, everybody's going to hate the rest of the talk now, because, if you have less than 30,000, it's an ambiguous number.
but if you don't have a ton of traffic to your site and the rest of your business is pretty good. Then you just need more traffic. and this is, this is a really tough thing for all of us to really grow and accept because it's an emotional thing to sell or embrace the marketing of your business.
What we're talking about is leverage right? Our communities lever. This is, we want to look for the single thing. We can turn this lever, this, and it moves a huge amount of business for us in the end. It's not. going back a couple slides. It's not getting our visitor to trial ratio, the 1.7, 5%, That's going to be a couple hundred bucks a month, but what if you tripled your website, traffic, that's some cheddar, right? And so that's what we're going to talk about for the rest of this. And this is like a tough thing. And even for me, I'm not a developer, I'm a marketer. Shouldn't be, cause I'm not a developer.
I have to be a sales and marketing guy, but we're all scared to do marketing and to really. Dive in and embrace the fact that we need to sell our stuff, within the tiny seed cohort. I think it's okay to talk about this guys. it is absolutely the one thing that everybody struggled with, right?
10 companies of successful multi-time founders. All of us every week are talking about how we can get more customers. very few of us are talking about. How can we build a thing it's more cool and maybe a little bit of design or something like that, but it all, a lot of that stuff ultimately goes to, how can I do better at sales and marketing?
Because we're all scared of it. this is it right? because the fear is I can go build a thing. All of you guys can go build a thing. That's really great. But there's a decent chance that all of us could, or many of us could dedicate ourselves to marketing and it failed. And then you've said, hi, I went all in on this thing and I couldn't pull it off.
And that's rough. Like emotionally, that's really rough. and so this is like rule of thumb number zero, right? Is that all the developers in here and even me, I'm not a developer, but I find myself falling into this trap a lot. Is that I lean on our development team, Instead of me going out and doing more marketing and figuring that part of the business, I say, and if we had this thing, we'd be set guys, when can we release this feature?
When, how about this integration? And that is not the problem, right? The problem, like if the rest of our SaaS metrics is good and that's what this assumes. If the rest of our SaaS metrics are good, Then we just need more customers. And the product will not solve that. There, I think are exceptions where like the product sells itself and all that.
And those people are not at this conference right there on those boats out there. but for the majority of us, we have to figure out how to sell our products easier and better. And that's, we'll talk about for the rest of our time. and so going back to like acquisition metrics, so really top of funnel, if you will stuff.
your acquisition metrics and where that kind of ugly mole is, should dictate how, when and where you talk to your customer. so who has heard of Eugene Schwartz? wait, cool. Couple. Yeah. So Eugene Schwartz, I think of him as he is the big guy from Madmen, right? Like he's an old school direct response marketer or an advertiser.
and so Eugene Schwartz wrote this book. That's now out of print than like to get it. It's 600 bucks on Amazon or something. And he talks about the five stages of a customer journey. We'll talk about the customer journey and how we all look can and do apply it to acquiring more customers and doing so in a really, appropriate way for those customers.
And so things that make a lot of sense for them. and so I have to give credit where credit is due. This concept was introduced to me by one of the tiny seed mentors, Taylor Hendrickson. so I love the Taylor's avatar photo is of him holding the beer. Cool. Taylor lives in hood river, Oregon, where they have fantastic beer.
and Taylor runs a marketing agency that helps staff businesses and e-commerce stores with exactly this thing. So it was like the perfect person to talk about it. Maybe he should be here talking instead of me, but. And so here's the gist of the show, great with the white font, the five phases of a customer journey, and it starts from the bottom and goes up, and the bottom is a place you don't want to be, right?
the bottom is a place where you're creating the market or you're creating the product in this market. And people are completely unaware that they have a problem or that there's a solution to it. Or there's a product that solves, the, that need that they have. and if you find yourself down here, you have a long time, the road ahead of you.
You have a product, a problem of educating the market on the problem, and that there's a solution. And that there's a product that builds what that solution needs to be, and that your product is the best one. And then they have to buy it. You have to go all the way up here. Some folks are problem aware and we'll talk, we'll give a couple examples that we'll just like specifically where some people are and how they attack this.
some people are problem aware and so they're like, I need a podcast hosting platform. Cool. Because I need to host my file somewhere. That's fair. So then you have to walk these folks from there is a problem. So there's a solution to your solution. Your product is the best one for them. And then from there and there.
So there's some people that say I need. A CRM to make my sales team more effective. Cool. it was about IO. It was.com. and then product there is I'm going to choose mixed bag channel or amplitude, and then that gets stuff. And so the, I think that the idea with some of this is that the higher up you get in this, the more difficult a lot of the marketing is because you are focused on smaller things.
So it might features this and that, rebates and discount codes and things like that. as you get up higher into this, and we'll talk a little bit more about some strategy around how you might think about entering this spectrum because people exist all along the spectrum and where you choose to enter and talk to your customers in the spectrum, talks about how, what kind of marketing you do and how long you might expect that some of this marketing takes.
So a few examples. So we're a podcast hosting platform. We have a couple of different customer personas. Some of them are existing gastros like myself, that might move from another tool like SoundCloud onto to Hostos that's one type of customer persona. We would talk to them in a different way than we would talk to new podcasts.
You probably pastors come in and laugh because it's an unenviable position for podcasting is really popular, but complex. It's not Oh, you spent a WordPress and you do a blog post. And it goes into the world. there's a lot to podcasting. A lot of people come in and say, I have no effing idea how to do any of this.
We have a lot of people that come into that. And that's cool because we can add a lot of them value by providing a ton of content around this. And that's what we do. And so here's a sample of like maybe what a funnel or a customer journey would look like is we have this huge how to start a podcast blog post.
and so a lot of people come to it organically. Some people come to it from ads that we run and they say, wow, this is a really cool, This is a really cool blog post, is probably those guys know what they're talking about. they may, they sign up for an email. First. We have a, 20 day how to start a podcast email course.
That's cool. And by the end of it, we pitched this thing called office hours, which is a live webinar. We run every week where we answer questions about podcasts. So all this stuff is the same. It's talking to the same person at the same point in their journey with the same topic, and then trying to answer and solve the same problem.
And the offer is, Hey, if you're a part of this email course, here's a coupon code to sign up. So all I did now, your permission to do this. So less accounting is, one of the tiny seed companies. And I know Paul really well. We talk every week. and so Paul is, less accounting is, accounting software for small businesses.
And their problem is, and I do my accounting, but it's a pain and I don't want to spend a lot of time on it and I want it to And so a sample kind of a customer journey for less accounting. And for Paul, it could be something like drive traffic to, what there's a two, a case study from one of his existing customers talks about how great Les counting is and how it saves them a ton of time.
Every week I was kind of stuff. Maybe then it's Hey, if you want to see more about less counting click here to view this demo, or Paul would go on a call with them and walk them through it. and then maybe we'd have a service about Hey, I'm going to solve this thing for you by making it super easy.
I'm just going to get all your books set up on your, on this platform for you or, use automated tools to make the, so we all heard from Steli earlier. Everybody knows what closes close the CRN. Yep. and so I think the customer persona here would be something like sales managers or directors or founders who wants to make their sales teams.
More productive, but also for them to have insights into what people are doing. Cause I manage a salesperson now and what the deal flow and the pipeline looks like is a big question I have as a founder. and so this is an interesting one that I think we'll spend some time talking about. Castelli is a really savvy guy.
Everybody heard him talk this morning. let's go here. So they write a metric strict ton of content around how to do sales better. And so Steli has dispelled some of this myth because you would consider that a lot of people looking for a CRM, like clothes are product aware, They know they need a tool to make their salespeople sell better.
And for the management team to have visibility into this. But I think what Steli has seen is that. That's a crappy place to be. Because then you're competing directly against pipe drive and Salesforce and the 8,000 other people in his space. And nobody wants to do that. Is anybody in a super unexpected, competitive space?
Anybody else in a super competitive space? Yeah. Do you try to attract and convert people really far down in the funnel and say, Hey, we have this feature that is better than everyone else. Yeah, you do. Is it going well?
Yeah, it sounds like it's going well. That's cool.
Yep. Yep. Cool. So that's a really good approach. That's a really good approach. So to go to the whole market, I think would be challenging. And so that's probably why you haven't done it is to say Close and pipe drive and Salesforce and all this, they basically do the same thing. So then coming into folks that are just product aware and trying to sell them on your thing versus everyone else's thing is skating.
so I think what Steli has done against he's a really savvy guy is he's gone up the ladder if you will, from here. And this is that I, this is where we'll leave things a little bit is there's not an answer to where you should talk to your customers. You should talk to them all the way through the spectrum.
but you should talk to them, the place that's the easiest and best for you. And maybe the place where your metrics tell you that you can provide the most value. And so Steli is down here, right? It sounded like the only way he can provide a moveable incentive for people is to lower his price or something that I know he would never do.
And so what he's chosen to do is to be a thought leader in the space. And go all the way up here, or maybe even here I would argue. And so Steli, and a lot of the really best brands we know, play all the way up in the problem, aware or the unaware side of the spectrum, and then follow their customers where customers follow them all the way through until they're ready to buy.
And I think this is the classic content marketing inbound approach that we see a lot of folks do. And I bring this up. Not that I think content marketing is the only way to go or the way you should go, because I think there are definitely people that can only focus further down in the customer journey, stage of things and talking about like old email, like you can do cold email and just sell people, like the folks from gathered.
And that's cool. And if you can do that, like a lot of us are MBS, right? Because you have a relatively straightforward, not simple, but a relatively straightforward thing to do. Like you have a tool. You can let folks know about it and convert them to the trialing and paying customers, hopefully. But if you think that is too hard to do, or you think you can't do that effectively at scale, then you have to move up the spectrum here to get folks earlier on in their journey.
as someone who's evaluating you, you as a solution or your market, and hopefully becoming a customer. Leanna was cool, everybody. Yeah. Right on. Cool. Thank you. And yeah, I think this is a, this is like wrap up and saying we should let our metrics guide where we focus our energy.
And then I think for the most folks in this room and myself included, like you built a good product. And so to, as much as you can devote yourself to marketing and understanding this customer journey. And approaching and talking to people at the appropriate point in their, and their journey as a buyer.
Hope you enjoyed that. Talk from Craig Hewitt and I'll be back next week with another microphone.