How to use SaaS KPIs to survive a market downturn

Most people are at least somewhat on edge about the economy at the moment, and SaaS companies are also seeing cause for concern. But if you can maintain your sense of focus and prioritize your key performance indicators (KPIs), you should be able to survive or even thrive during the market downturn.

SaaS KPIs matter tremendously for a range of different reasons:

• They give you a grip on reality: Operating with false confidence is one of the most dangerous patterns of behavior you can adopt in business. That’s doubly true when the market goes sour. During times like these, your SaaS KPIs offer vital clarity about what’s working and what isn’t.

• Metrics prove your progress: Your SaaS KPIs can offer your whole team a psychological boost. After you’ve set your departmental and company-wide goals around metrics, having concrete daily and weekly proof of your forward momentum can be gratifying.

• Strong metrics impress investors: Generating venture and investment capital can significantly extend your financial runway in challenging markets. Having genuinely impressive SaaS KPIs will help sway investors in your favor.

During a market downturn, honing in on your SaaS KPIs can prove  more valuable than ever. Here are a few of the most significant KPIs to remain mindful of in bear markets.

Watch your churn and engagement numbers like a hawk

Your voluntary churn rate is often linked to the engagement level you’re fostering in your customers. After all, if many people are engaging with you happily and regularly, your churn rates probably aren’t that high.

You should also be mindful of involuntary churn, however. It’s always important to stay on top of your payment processing. But when everyone’s trying to stretch their cash to combat a market downturn, your customers might reconsider signing up for your services a second time once they’ve been kicked off. You want to avoid that.

If your churn rate is climbing and engagement is falling, consider these strategies:

• Offer discounted subscriptions: Who doesn’t love a good deal, especially when inflation’s taking off? You could tackle this in multiple ways: offering a bulk discount for purchasing numerous months, a user-based discount, or giving one free month to new signups.

• Incentivize social sharing and posting: If you haven’t been maximizing your effectiveness on social media, there’s no time like the present. Creating platform-exclusive content and then telling your customers about it is a great way to get more traffic to your accounts.

• Consult your CMO: If your engagement is flagging, have a quick one-on-one with your company’s CMO. Limiting the meeting to the two of you ensures that you both feel free to speak your minds about what’s working and what might need fixing.

Next, let’s turn our attention to the financial side of things.

Take it month by month

In poor market conditions, you should narrow your time horizon and perspective. Watch your revenue month by month to carefully track and address any negative patterns that might be forming while also keeping an eye on your annual recurring revenue (ARR).

Your monthly recurring revenue (MRR) gives you a consistent way to check in with yourself and your team each month. If troubling developments are spotted, these can hopefully be addressed and turned around before they become serious problems.

Modern cloud accounting solutions for SaaS companies include a SaaS metrics dashboard and automate the MRR calculation with real-time data. Accounting solutions like Sage Intacct can help you focus and prioritize your SaaS KPIs.

Think of it like this: By consistently managing and improving your MRR, your ARR essentially takes care of itself. Your MRR serves as your compass to give you a sense of your direction throughout the year, and your ARR is the rewarding view you get after the journey. No surprises, no anxiety, just a serene sense of satisfaction in your accomplishments.

Accounting software can help you forecast your MRR with pinpoint accuracy.

Improve your customer effort score

Customer effort score (CES) is a scoring metric for how hard a customer has to work to get a question answered or a problem resolved. For instance, on a scale of 1 to 5, where 5 represents the maximum level of customer effort required, you’d want to score a 1.

A SaaS company’s CES becomes a big deal during a market downturn. Depending on their industry and services, many SaaS apps find themselves in the “first to go” category as consumers across the nation curtail their spending.

Making it simple and seamless for your customers to get help when they need it goes a long way. You should be asking yourself:

• If you’ve done enough: What have you offered your customers in terms of self-service options, for instance? Have you built out a robust “resource center” full of easy-to-read content? Maybe try an automated chatbot?

• Where the weak links are: Customer service is often a chain of solutions rather than just a single one. An automated chatbot might try to help first. If it can’t help, it refers the customer to the company’s online resource center. If that still doesn’t work, the customer will probably call or email at that point. Ensure that your entire customer service chain operates smoothly and there aren’t one or two links weakening the whole thing.

• If the writing is on the wall: Often, customers will write reviews signaling their dissatisfaction if you fall short on your customer service obligations. You need to be proactive about listening to them and quickly making corrections where people have asked for them.

Work to optimize your CES. You’ll give yourself an essential advantage over many of your competitors while everyone rides out the market downturn.

Summing Up

We’ve only scratched the surface of why predictive SaaS KPIs are vital during a market downturn.

Check out our recent ebook to learn even more about surviving and thriving in bear markets with predictive metrics.