Subscription metrics and reporting
Every company needs to track its performance to make smart, informed decisions in order to gauge success, grow, and adapt. Companies that operate with recurring revenues need to adopt metrics that reflect the economics of subscription business models. Subscription businesses have unique sets of data points and KPIs that typical reporting and analyses cannot serve. To be successful, these companies need reporting and analytics capabilities tailored to their recurring revenue business needs.
Metrics and reporting factors
Many factors influence the long-term success and profitability of subscription-based businesses. These factors include: pricing, product line changes, email communications, channel management policies, ease of sign-up and sign-on, usability of features, and more. Subscription businesses can remain agile, responsive, and sensitive by fine-tuning business strategies with the help of the reporting and analytics features built into the Vindicia subscription lifecycle management platform.
The Vindicia solution works intelligently as your company’s business partner, shedding light on factors that influence growth, identifying unique industry data points, and turning insights into recommendations. Vindicia provides crucial subscription intelligence.
Here are 8 metrics that subscription businesses should keep a close eye on:
1. Monthly Recurring Revenue (MRR)
MRR is the No. 1 metric for any subscription company. It is a gauge of the revenue a business can depend on from month to month, which is crucial for cashflow forecasting and real-time insight into financial health.
MRR = [monthly price of service x number of active customers]
2. Average Revenue per User (ARPU)
Subscriber revenue is rarely a simple calculation. Beyond the regular fee, revenue can rise or fall due to discounts, freemiums, upgrades, downgrades or one-time purchases, to name a few factors. The ARPU metric provides a single, rationalized figure that takes all of these variations into account.
ARPU = [total revenue in subscription sales / total number of customers]
3. Customer Lifetime Value (CLV)
CLV is the most fundamental of all recurring revenue metrics. It tells you how much revenue a subscriber generates in total. The upside of the subscription business model is the simple truth that the longer you retain a customer, the more value they create.
[(average monthly revenue per customer x expected average lifetime) - acquisition costs and overhead]
4. Customer Acquisition Cost (CAC)
Growth is the lifeblood of subscription companies, but it comes with a cost and must be balanced against expected revenue. Your CLV and ARPU data combined with the CAC metric will help you answer the question of how much you should be spending on customer acquisition.
[total acquisition marketing and sales spend for a given period / new paying customers converted during that period]
5. Churn Rate
While churn is inevitable in a subscription business, the concept of “acceptable levels of churn” is intolerable. Churn is insidious, driving companies to invest more in acquisition to sustain growth targets, and ultimately damaging to brand value.
[(total cancellations for a given period / total number of customers during the same time) x 100]
6. Growth Efficiency/Magic Number
One of the trickiest questions that a CEO and CFO face is how to allocate resources. Growth efficiency is known as the “magic number” because it captures how much growth in revenue can be generated by a dollar spent on marketing or reinvested in the business. Investors like to use the growth efficiency metric to evaluate a company’s performance.
[(recurring revenue in present quarter - recurring revenue in preceding quarter) / total marketing and sales spend for quarter 1. Round to the nearest tenth.]
7. Lead Velocity Rate (LVR)
LVR is a real-time metric that measures whether companies are doing a good job of growing their pipeline.
[(number of qualified leads in current month - number of qualified leads in preceding month) / qualified leads in current month x 100]
8. Subscriber Return on Investment (sROI)
Unlike ROI, which is a macro metric, sROI allows you to drill down to expected returns at the subscriber level. Essentially, sROI is the ratio of lifetime value to acquisition costs, which gives an indication of the relationship between profitability and financial health.
[CLV / CAC]
Like LVR, a high sROI will indicate general health and profitable customers, while a low figure points toward underperformance and potentially declining value. Track sROI to ensure that you’re not paying more for customers than they are worth.
Check out our ROI Calculator to delve into your metrics.
Vindicia subscription billing platform
The Vindicia Subscribe solution makes it easy to track the metrics that are critical to subscription-based businesses:
- Rapidly generate detailed, thorough reports revealing the effectiveness of promotions, campaigns and other efforts
- Review Subscribe Dashboards for daily insights, operational trends, and key metrics
- Employ 40 distinct native reports in your merchant portal, providing 40 different ways to see subscription intelligence
- Bring subscription billing data into your Salesforce application, processes, and workflows with Vindicia Subscribe for Salesforce apps
- Comply with new revenue recognition requirements
Dashboards and reports
Whether displaying recurring revenue by country or highlighting subscriber growth rates, Vindicia Subscribe Dashboards help you test various business hypotheses and provide you with the information you need to advocate changes based on trends in the marketplace.
Vindicia Subscribe reporting comes in multiple flavors, with 40 pre-built reports that identify the key metrics critical for any subscription business. In addition, we designed Vindicia Subscribe to also support API-level querying of any data element or series that you can import and analyze within your data warehouse. Vindicia Subscribe reporting provides a real-time view of how your subscription business is evolving.
Collaborating to improve your business
Vindicia clients benefit from the Network Effect of our subscription intelligence and wealth of subscription transaction data through regular Vindicia Client Business Reviews with our team of subscription specialists. Using cohort analysis, peer rankings, and our knowledge of best practices, we review and analyze key metrics from your organization. The actionable recommendations from our Client Business Reviews can help you grow subscribers, improve retention, and reduce chargebacks – leading to higher recurring revenue.
Learn more about subscription metrics
Download our actionable Subscription Metrics eBook to learn about the top eight metrics that will help your organization achieve subscription business success.
Learn how Vindicia’s sports clients are tracking and using subscription metrics.