As SaaS companies scale and seek additional funding rounds, board decks become an increasingly important tool to align a company and its investors around its growth trajectory. But creating these boards can be stressful, and that can be exacerbated by the struggle of not knowing what data to include and how to access that data.
To help companies facing those challenges, Jim O’Neill, who has experience with board decks from both the perspective of a company founder and an investor, compiled a list of five KPIs SaaS companies can use to create a minimum viable product of a board deck. We’ve broken down the benefits of measuring these KPIs for your company and your board.
As your data analysis and reporting capabilities become more sophisticated over time, there will be additional metrics you’ll want to share in your board decks. However, these five metrics are a great starting point for analyzing your growth trajectory.
5 Essential KPIs for SaaS Board Decks
1. Monthly recurring revenue (MRR)
One of the major benefits of having a SaaS subscription offering is the predictability of your monthly revenue. Based on how many customers you have and the size of their contracts, you can calculate MRR, then use that number to forecast your annual revenue and set goals for customer acquisition and expansion.
If you take expansion revenue, contraction revenue and churn into account too, you can calculate net MRR. Boards can use this KPI to evaluate the rate at which your business is growing.
You can also analyze MRR by segment to get actionable insights about how you should adjust your strategy. For example, you might have a positive MRR overall, but see a loss within a specific segment, which can indicate poor-fit customers or an issue with your service delivery. Alternatively, if you have a shrinking MRR overall but positive MRR within specific segments, that can help you determine where to focus your customer acquisition and retention efforts in order to grow more sustainably.
2. Net revenue retention (NRR)
While MRR is an important metric to analyze, it can be misleading: it doesn’t take all of the costs of acquiring that revenue into account. For scaling recurring revenue businesses in particular, customer acquisition cost (CAC) can majorly cut into profitability. You can have a high MRR but still not be profitable at the company level if your CAC outweighs the revenue you’re bringing in.
Net revenue retention (NRR) accounts for how much revenue you’re keeping as well as how much you’re bringing in. Ideally, you should not just be making more than you’re spending, but also increasing the difference between those two amounts month over month. Boards want to see net revenue retention increasing over time.
Just as with MRR, to get the most actionable insight from NRR, you should be analyzing it at both the segment level and the company-wide level.
3. Customer lifetime value (CLV)
Customer lifetime value (CLV) should be a driving force for every customer-centric company because it focuses on the exchange of value between your company and your customers over the entire length of your relationship. To attain a high CLV, you need to not just keep your acquisition costs reasonable in comparison to your contract values, but also retain and expand your customers multiple times.
Unfortunately, for newer companies, not having enough historical data to calculate your margins is a common issue. So instead, you can use average customer lifespan (ACL) and a simpler version of the CLV equation to get an approximation:
Quick ratio juxtaposes how much new revenue your company is adding with how much you’re losing during a given period. It helps you compare your expansion and retention revenue with revenue lost to churn.
This ratio helps you understand if your investment in marketing, sales and service is resulting in ROI. Boards also use this to understand how your growth rate and loss rate compare.
5. Revenue per employee (RPE)
Revenue per employee (RPE) used to be a much more popular growth metric, but it’s no longer used that commonly in the SaaS and subscription industries. However, it can be a great proxy for profitability.
You can calculate it by dividing your total revenue by the total number of full-time employees you have. If your RPE is significantly larger than the average salary of your employees, that can be a sign that your company is profitable.
Boards use this metric to understand the results you’re seeing from your hiring investments, though the size of your RPE can also be impacted by your growth stage. High-growth companies may have low RPEs as they go through hiring booms, but the metric can improve over time as their growth stabilizes.
The Takeaway
The most effective board decks are not just made to appease investors but rather to reflect how those SaaS companies are actually operating. If the metrics you’re presenting can’t inform your strategy, then the board deck creation process can feel tedious and fruitless. But those sort of board decks don’t help anyone.
A board’s job is to help advise you. If you’re not equipping them with information that enables them to effectively do so — and you’re not using the data you’re compiling either — that board deck becomes a waste of everyone’s time.
The metrics listed in this post are great starting points to include in your SaaS board deck, but you should also build on them with other KPIs you use to guide your growth strategy.
