As an entrepreneur, you must be aware that the subscription business growth is becoming more competitive. So, what’s the key to accelerating growth and increasing revenue for success? It’s all about understanding the metrics that drive your business performance.
By monitoring these key performance indicators (KPIs), you can allocate resources effectively and outperform your competition. Imagine if you could identify the most impactful factors contributing to your subscription business growth and leverage them to create a winning formula for success. With the right metrics at your disposal, you can make smarter decisions and adapt to the ever-changing market.
In this article, you’ll discover six essential metrics to help you with your subscription business growth. Let’s dive in!
1. Monitor Committed Annual Recurring Revenue (CARR)
Committed Annual Recurring Revenue (CARR) is a crucial metric for subscription-based businesses. It reveals the total revenue your company can expect from customers in a year. To calculate it, multiply the average revenue per user (ARPU) by the total number of subscribers. CARR differs from ARR by considering committed contracts and potential upsells, providing a more accurate forecast of your business’s future revenue.
For example, if you have 1,000 subscribers and an ARPU of USD$50, your CARR annual recurring revenue would be USD$50,000. Tracking CARR is essential as it offers insights for making sound pricing and resource allocation decisions. Moreover, it helps you spot trends and identify areas for improvement.
2. Track Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is the average amount you spend acquiring a new customer. To calculate CAC, divide your total sales and marketing expenses by the number of new customers acquired during a specific period.
For instance, if you spent USD$10,000 on sales and marketing efforts and gained 100 new subscribers, your CAC would be USD$100. Monitoring this metric allows you to gauge the effectiveness of your marketing strategies, optimize them to lower the cost, and allocate resources more efficiently to boost your return on investment (ROI).
3. Analyze Customer Lifetime Value (CLTV)
Customer Lifetime Value (CLTV) is the total revenue you can expect to generate from customers throughout their entire subscription period. Calculating CLTV is simple: multiply the average revenue per user (ARPU) by the average customer lifespan.
For example, if your ARPU is USD$50 and your average customer lifespan is 24 months, your CLTV would be USD$1,200. By analyzing CLTV, you can determine your clients’ long-term value, helping you allocate resources for retention efforts. This metric enables you to identify the most profitable customer segments and tailor your marketing strategies.
4. Evaluate Customer Retention Rate (CRR)
Customer Retention Rate (CRR) shows the percentage of customers who stay subscribed over a specific period. To find your CRR, divide the number of customers you kept at the end of a period by the total number of customers at the start of that period, then multiply by 100.
For example, if you started with 1,000 customers and retained 900 by the end of the month, your CRR would be 90%. A high CRR indicates that customers are satisfied with your product and more likely to continue their subscriptions. By monitoring CRR, you can identify potential issues with customer satisfaction and make changes to enhance the customer experience.
5. Measure Monthly Recurring Revenue (MRR) Growth
Monthly Recurring Revenue (MRR) is the predictable income you can expect from subscription-based customers. Monitoring MRR growth is vital, as it reflects your business’s overall health and growth direction.
To find your MRR growth, subtract the MRR at the start of the period from the MRR at the end, divide the result by the MRR at the beginning, and multiply by 100. For example, if your MRR increased from USD$10,000 to USD$12,000, your MRR growth would be 20%. Evaluating MRR growth allows you to spot trends and make data-driven decisions to fine-tune your business strategies and enhance growth.
6. Gauge Net Promoter Score (NPS)
Net Promoter Score (NPS) is a customer satisfaction metric that measures the likelihood of customers recommending your product or service to others. NPS is determined by asking customers to rate their likelihood of recommending your business on a scale of 0 to 10. Those who rate 9-10 are considered promoters, while those who rate 0-6 are detractors.
To find your NPS, subtract the percentage of detractors from the percentage of promoters. For instance, if 60% of your customers are promoters and 20% are detractors, your NPS would be 40. A high NPS indicates strong customer satisfaction and loyalty, leading to more referrals and business growth. Assessing NPS provides valuable insights into your customers’ experiences and enables you to make improvements to boost customer satisfaction and retention.
Ready To Accelerate Subscription Business Growth?
Mastering these six metrics can significantly impact your subscription company’s growth and success. As you adjust your business strategy, remember to continuously adapt your approach. How can you achieve this? By tailoring your marketing tactics to your subscribers’ preferences.
Now that you’re equipped with this knowledge, it’s time to take action. Harness the power of these KPIs and watch your subscription business growth!