SaaS Development Company

SaaS industry has experienced potential growth over the last few years. SaaS technology is growing at a rapid pace, but you should not forget to consider SaaS business metrics that can help you achieve high revenue.

Here are some of the SaaS business metrics that matter the most:

• Customer Churn
  If you have planned to build a SaaS solution with the goal of increased customers in mind, maintaining existing ones becomes essential. Customer churn rate evaluates how much business you have lost within a specific time span. It helps you track the day-to-day continuity of the business.

  Since most of the SaaS businesses are based on annual subscriptions, retaining customers is as essential as acquiring new ones. When you track churn on a quarterly or monthly basis, make sure to consider other parameters apart from the customer count as well. Ensure to identify personas of churned customers to find why they failed to renew subscriptions. It is good to discuss this information with sales, customer success and marketing department.

• Customer Lifetime Value (CLV) 
  Customer Lifetime Value is the amount of money that you charge from customers when they engage with your company. CLV provides businesses with an accurate report of their growth and can be evaluated in the following two ways:

  1. Identify the CLV by dividing 1 by customer churn rate. For example, if the monthly churn rate is 2%, it means customer lifetime value would be 50 (1/0.02= 50).

  2. Find customer lifetime rate by multiplying ARPA(average revenue per account) with customer lifetime. ARPA is calculated by dividing total revenue by the number of customers. If the revenue is $200,000, divide it by 200 and ARPA would be equal to $1,000.

  CLV represents the worth of your average customer. For startups, it presents the value of the company to investors.

• Revenue Churn
  It is essential to evaluate revenue churn along with customer churn to find the outside impact consumers may have over others. If subscription price varies based on the number of users or seats a customer pays for, the customer churn rate can be different than the churn rate if customers produce more revenue than others.
• Cost of customer acquisition
  Customer Acquisition Cost (CAC) represents the exact cost to acquire new users and how much value they can drive to the business. When CAC is combined with CLV, this overall metric assists companies assures the viability of a business model.

  Divide total sales and marketing spend by the number of new customers to evaluate CAC. For example, if your marketing and sales spend is $200,000 in a month and 100 new customers have been added, CAC would be equal to $2,000.

The cost to develop a SaaS solution depends on whether you hire a developer or an agency. The US-based SaaS app developer costs $60 per hour on average. For example, if your SaaS app development takes 4 months, it would require 600 hours to develop an application. It means it would cost you $36k to build the SaaS solution. 

However, development companies/agencies might cost you more than hiring individual developers. The high cost would give you a lot of benefits. First, companies tend to have more experience than individual developers as they have worked on many development projects. 

Second, you will not have to involve a lot in the project during development as agencies have a big team to work on the project who can manage it efficiently. Working with agencies is more expensive than individual developers because agencies assign multiple developers and a project manager to deliver a high-quality product in a short time. 

Software as a Service is a software delivery and licensing model in which software is hosted centrally and licensed on a subscription basis. 

Using this model, a single model of the application with a single configuration can be used for multiple customers. SaaS application is installed on several machines to support scalability. 

A second version of the application can also be created to provide a selected group of customers with access to pre-release application versions for testing. 

SaaS can be of two types:

• Vertical SaaS
  A solution that fulfills the need of a particular industry. (For example, software for agriculture, software, finance and real estate industries)
• Horizontal SaaS 
  Solutions that emphasize on a software category. (For example, developer tools, marketing tools)

An administrator does not have to worry about software updates. SaaS technology aims to reduce the time and cost of deployment.