SaaS Financial Metrics

The Most Important Metrics to Secure SaaS Funding in 2024

There are many people who have amazing SaaS business ideas, however, they do not have enough money to invest so that their ideas can be materialized. These ideas can be business ideas or some new project idea for which a hefty amount of money is needed. What should be done?

Give up the idea?

Well, no! We suggest you start working on the feasibility of your idea, present it to an investor, and secure funding for your SaaS business idea.

Is it that easy?

Ahm! Not exactly! You will have to put in effort, but it’s worth it. We will help you with this. Here, in this article, we are going to jot down the SaaS financial metrics that investors look into before giving you funding for your project or business idea. Today, metrics or KPIs have made it easier for investors to see if they should invest in a project or not. So, you need to work so as to improve the performance of these KPIs for your business.

SaaS Financial Metrics to Get Funding for Your Project

As the SaaS industry continues to thrive, understanding and leveraging key financial metrics is paramount for securing funding. So, here are the metrics that you need to monitor:

1. ARR Per Employee

Every company has some revenue targets, and when they get revenue, they conduct audits to see how this revenue was generated and how it was spent. When you are to work on the task of securing funding for your SaaS project, you also need to see the revenue that you are already generating. However, here is the twist. You need to go the extra mile and see how much each employee contributed in earning a certain annual recurring revenue (ARR). It will help you build constructive and productive teams and use investment in the right way.

Also Read: Here’s How the Right SaaS Financial Models Affect Your Business

Other than annual recurring revenue, one also needs to monitor Monthly Recurring Revenue (MRR) so that funding can be secured. Unlike ARR, MRR helps in understanding the performance of the business every month. Moreover, investors also look into this metric when they are considering your idea for funding.

2. Customer Acquisition Cost (CAC)

Investors will also look into these metrics that show how much you spend on acquiring new customers. A company’s customer acquisition strategy’s effectiveness can be clearly seen by looking at its customer acquisition cost (CAC), which is determined by dividing the total marketing and sales expenses by the number of customers acquired during a given period of time. In general, a lower CAC indicates cost-effectiveness in customer acquisition. To ensure that the cost of client acquisition doesn’t degrade the calibre of the customer base that is obtained, it is imperative to find a balance. Because CAC directly affects a company’s scalability and long-term profitability, investors actively monitor it. Not only does a strong marketing and sales plan draw in investors, but a well-optimized CAC also shows a competitive and long-lasting business model.

3. Total Addressable Market (TAM)

The entire revenue opportunity that is available for a good or service inside a particular market at its full potential is known as the Total Addressable Market (TAM). It expresses, without any restrictions or limitations, the whole demand for a specific solution or category. TAM is a critical statistic in strategic planning, particularly when looking for finance, and it assists businesses in estimating the upper limit of their market opportunity. The entire market size, the prospective client base, and the total income that could be earned if the good or service reaches full market penetration are all taken into account when calculating the total addressable market (TAM). Investors comprehend TAM in order to evaluate a company’s growth potential and ability to take a sizable market share.

4. Conversion Rates

The outcome of your marketing strategies, sales strategies, sales funnel, and go-to-market (GTM) strategies is the conversion rate. So, if one needs to monitor all these policies of your business, he just needs to look into this metric of your business, and the picture will be crystal clear. So, if you want your investors to trust your sales and marketing policies, then you need to constantly monitor the conversion rate for your SaaS business. The greater the conversion rate, the more will be the chances of securing funding for your SaaS subscription business idea.

Also Read: 10 Most Important Customer Success Metrics for SaaS Subscription Businesses

5. Retention Rate

Another metric that is linked with conversion rate is the customer retention rate. It shows if your customers are satisfied with your services and products. In the SaaS business world, it is important to win customer trust because most businesses opt for the subscription business model in the market. Here, customer satisfaction guarantees the next purchase of your customers. Investors are always interested in the SaaS finance metrics of your business because it not only shows your customer satisfaction but also many other related factors of your business. So, it is crucial to work on this metric from the beginning.

So, these are all the SaaS financial metrics that sometimes do not look like they are related to the financial activities of the business but they actually do. In fact, almost all metrics are linked with the financial activities of the business because they numerically show how you are thriving in the market. With the help of these metrics, the overall performance of the business comes out in the form of simple numbers and graphs. Work on these metrics and secure solid funding for your SaaS project idea.

However, if you need subscription management software that can help you materialize your plans and ideas for your SaaS business, then contact SusbcriptionFlow. It not only manages subscriptions but also improves the performance of all metrics that are necessary to hunt investors in the SaaS market.