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S/4 HANA Cloud provides integration with SAP HCM Solutions

ERP Cloud (S/4 HANA).

The SAP S/4 HANA cloud suite is a significant transformation shift by SAP

as SAP look to provide a true ERP Cloud solution with greater technology benefits SAP Cloud Benefits.

Innovation Continually Delivered

SAP deliver new innovations and enhancements on a quarterly basis

Customers have the ability to adopt new functionality when best suited to their organisation s needs;Time to Activation.

Built as a true SaaS with built in best practices

the S/4 HANA suite allows for quick uptime, achievable in weeks, not months; Integration.

Easily enable integrations to both SAP and non-SAP solutions

Out of the box integration s are simply enabled for SAP Cloud products such as Ariba and SuccessFactors.

S/4 HANA provides seamless Integration with SAP Solutions

It allows organisations to integrate with market-leading SAP solutions through built-in integration s.
Be Proactive.
The agility of the cloud allows organisation s to be proactive in their marketplace and further realise their return on investment; Cloud ERP key capabilities include: Finance.
Consolidate all financial, managerial, and operational processes into a single solution with real-time processes, .

Being integrated into ERP modules

Being a single source, it provides advanced reporting and analytics to enable insightful reporting as well as providing the ease and flexibility of online report designs.
SAP Finance provides a proven platform used worldwide to allow organisations to streamline core finance processes, manage assets, and allow the finance team to focus on more value-adding activities for their organisation, such as manage spend, resources, and financial reporting requirements .
Human Resources .
S/4 HANA Cloud provides integration with SAP HCM Solutions, to ensure that full human resource services are managed and planned within S/4 HANA Cloud application. The solution for simplified human resources can help you combine local requirements with global integration and real-time insight – for fast, efficient, and accurate services.
S/4 Functions, such as project planning, have real-time human resource data and accurately record activities , times and costs through accurate workforce records.
Procurement / Sourcing.
Reduce manual tasks and improve governance across the procurement process. Understand your organisations spend and remove inefficiencies with machine learning that can increase profits and employees available time.  S/4 HANA Cloud provides functionality from fundamental management of supplier costs and sourcing efficiencies, operational procurement, contract sourcing and management through to procurement analytics.
Purchasing reporting and analytics provides up-to-the-minute insights across all aspects of the procurement lifecycle.
In a market where organisations must be more responsive to customers, maintaining real-time visibility and transparency over manufacturing operations is critical to remain competitive and excel.
Optimise manufacturing processes and engage with global networks whilst reducing manufacturing costs.
Professional Services.
An industry purpose built solution, Professional Services is available to organisations looking to deliver client value profitably.
S/4 HANA Professional Services allows organisations to manage client engagements and manage every aspect of their operations to deliver consistent quality and high-value services.
Sales / Marketing.
Engage with your customers and gain valuable insights from their digital behaviour whilst achieving retention, reducing customer acquisition costs and providing them a unique customer experience.
In the rapidly changing marketplace, companies need to adapt in the engagement models and maximise sales value with one stop order and contract management.
Looking for a transformational shift?For those organisations seeking to move to the world leading ERP solution to support their strategy and growth plans, Discovery Consulting can provide all hardware and implementation services required to provide the transformational software platform.

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SaaS portfolio rationalization. Sprawling adoption of SaaS

Blog Archives.

Hunting the Dread Gazebo of Repatriation

Jul 27 (Confused by the title of this post

Read this brief anecdote.) The myth of cloud repatriation refuses to die, and a good chunk of the problem is that users (and poll respondents) use “repatriation” is a wild array of ways, but non-cloud vendors want you to believe that “repatriation” means enterprises packing up all their stuff in the cloud and moving it back into their internal data centers — which occurs so infrequently that it’s like a sasquatch sighting.
A non-comprehensive list of the ways that clients use the term “repatriation” that have little to nothing to do with what non-cloud vendors (or “hybrid”) would like you to believe: Outsourcing takeback. The origin of the term comes from orgs that are coming back from traditional IT outsourcing.
However, we also hear cloud architects say they are  “repatriating” when they gradually take back management of cloud workloads from a cloud MSP; the workloads stay in the cloud, though.

Migration pause. Some migrations to IaaS/IaaS+PaaS do not go well

This is often the result of choosing a low-quality MSP for migration assistance

or rethinking the wisdom of a lift-and-shift.
Orgs will pause.

Switch MSPs and/or switch migration approaches (usually to lift-and-optimize)

and then resume.
Some workloads might be temporarily returned on-premise while this occurs.
SaaS portfolio rationalization. Sprawling adoption of SaaS, at the individual, team, department or business-unit level.

Can result in one or more SaaS applications being replaced with other

official, corporate SaaS (for instance, replacing individual use of Dropbox with an org-wide Google Drive implementation as part of G-Suite).
Sometimes, the org might choose to build on-premises functionality instead (for instance, replacing ad-hoc SaaS analytics with an on-prem data warehouse and enterprise BI solution).
This is overwhelmingly the most common form of “cloud repatriation”.
Development in the cloud, production on premises.
While the dev/prod split of environments is much less common than it used to be, some organizations still develop in cloud IaaS and then run the app in an on-prem data center in production.
Orgs like this will sometimes say they “repatriate” the apps for production.
The Oops. Sometimes organizations attempt to put an application in the cloud and it Just Doesn’t Go Well.
Sometimes the workload isn’t a good match for cloud services in general.
Sometimes the workload is just a bad match for the particular provider chosen.
Sometimes they make a bad integrator choice, or their internal cloud skills are inadequate to the task.
Whatever it is, people might hit the “abort” button and either rethink and retry in the cloud, or give up and put it on premises (either until they can put together a better plan, or for the long term).
Of course, there are the sasquatch sightings, too.

Like the Dropbox migration from AWS (also see the five-year followup)

but those stories rarely represent enterprise-comparable use cases.
If you’re one of the largest purchasers of storage on the planet, and you want custom hardware, absolutely, DIY makes sense.
(And Dropbox continues to do some things on AWS.) Customers also engage in broader strategic application portfolio rationalizations that sometimes result in groups of applications being shifted around, based on changing needs.
While the broader movement is towards the cloud, applications do sometimes come back on-premises, often to align to data gravity considerations for application and data integration.
None of these things are in any way equivalent to the notion that there’s a broad or even common movement of workloads from the cloud back on-premises, though, especially for those customers who have migrated entire data centers or the vast majority of their IT estate to the cloud.

(Updated with research: In my note for Gartner clients

“Moving Beyond the Myth of Repatriation: How to Handle Cloud Projects Failures”, I provide detailed guidance on why cloud projects fail, how to reduce the risks of such projects, and how — or if — to rescue troubled cloud projects.) Tweet.

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Increased geo availability of VMware Cloud on AWS (Ireland

Continuation of Any Cloud, .

Any Device & Any App strategy – An update from VMworld 2018 Europe

November 9, 2018 1 Comment.
The beginning.
As an avid technologist, I’ve always had a thing for disruptive technologies, especially those that are not just cool tech but also provide genuine business benefits.
Some of these benefits are obvious at first, but some are often not even anticipated until after a technology innovation has been achieved.
VMware’s inception: Through the emulation of X86 computing components within software was one of these moments where the power of software driven computing started a whole new shift in the IT industry.

In an age of Hardware centric IT

this software defined computing technology paved way to achieve genuine cost savings through consolidation of multiple servers in to a handful of servers instead.
For me back then as a lowly server engineer, introduction to this technology was one of those “goose bump” moments, especially when I thought about the possibilities of where this technology innovation could take us going forward, especially when that’s extended beyond just computing.
Fast forward about 12 more years, the software defined capabilities extended beyond compute in to storage and networking too, paving the way for brand new possibilities such as cloud computing.
Recognising the commoditisation of this software defined approach by various other vendors, VMware strategically changed their direction to focus on building tools and solutions that provide customers the choice to run any application, on any cloud platform, accessible by any end user device (PC & Mobile).
This strategy was launched back in 2015 and I’ve blogged about it here.
Continuation of a solid strategy.
Following on from vSphere.

VSAN and NSX as pillars of core software defined data center (SDDC)

last couple of years showed how this vision from VMware was coming in to reality through the launch of various new solutions as well as modernisation of exiting solutions.
IBM cloud (based on SDDC) & VMware Cloud on AWS (based on SDDC) were launched to harness cloud computing capabilities for customers without having to re-platform their workloads saving transformation costs.
Along with over 2000 VMware Cloud Provider partner platforms (built on SDDC) all of whom that runs these very same technologies underneath their cloud platforms, this common architecture enabled customers to easily move their workload from on premises to any of these platforms relatively easily.
Introduction of technologies such as VMware HCX last year made it even easier through one click migration of these workloads as well as the ability to move a running workload on to a cloud platform with zero downtime (Cloud motion).
In addition to the core infrastructure components, the existing infrastructure management and monitoring toolset deployed on-premises (vRealize suite) was also revamped over the last few years such that they can manage and monitor these environments across all these cloud platforms.
vRealize suite was now one of the best Cloud Management Platforms that could provision workloads on to on-prem & on native cloud platforms such as AWS and Azure providing a single pane of glass.
NSX capabilities were also extended to cloud platforms to effectively bring cloud platforms closer to on-premises data centers via network adjacency providing customers easy migration and fall back choices while maintaining networking integrity across both platforms.
With these updates.

The vision of “Any Cloud” became more of a reality

though most of the use cases were limited to IaaS capabilities across the cloud platforms.
During last year.

VMware also launched a number of fully managed

born in the cloud SaaS applications under the category of VMware Cloud Services (v1.0) aimed at extending this “Any Cloud” capabilities to cover none IaaS platforms.

These SaaS offerings enabled ability to provision

manage and run cloud native workloads on none vSphere based cloud platforms such as Azure and native AWS platforms.
These extended the “Any cloud” capabilities right in to various PaaS platforms too enabling better value to customers.
A list of these new solutions and updates were listed on my previous post here.
Last few years also showed us how VMware intended on achieving the “Any Device” vision through the Workspace One platform & Air Watch.
Incremental feature upgrades ensured that support for a wide array of end user computing and mobile devices to consume various enterprise IT services in a consistent, secure manner, regardless of where the applications & the data are hosted (on-premises or cloud).
These updates include support for key none vSphere based cloud platforms and even competitive technologies such as Citrix providing customers plenty of choice to use any device of their choice to access applications hosted via all major avenues such as Mobile / PC / VDI / Citrix / Microsoft RDS.
“Any App” vision of enabling customers deploy and run any application was all about providing support for traditional (VM) based apps, .

Micro-services based apps (containers) and SaaS apps

The partnership with Google for the implementation formed and new products such as PKE were also launched to provision, manage and run container workloads via an enterprise grade Kubernetes platform, both on premises as well as on cloud platforms, making the Any App strategy also a reality.
Update in 2018!.
2018’s VMworld (Europe) messaging was very much an incremental continuation of this same multi-platform, multi app and multi device strategy, adding additional capabilities for core use cases.
Some of the new updates also showed how VMware are also adding new use cases such as Edge computing and IoT solutions in to the mix.

Some of the key updates to note from VMworld 2018 include

Heptio acquisition:    To strengthen the VMware’s Kubernetes platform offerings (Complements on-premises focused PKS as well as a SaaS offering for managed Kubernetes in VKE).
VMware Cloud PKS:    PKS as a Service (managed by VMware) on AWS with support coming for VMware Cloud on AWS, Azure, GCP and vSphere.
Project Dimension:    Fully managed VMware Cloud Foundation solution for on-premises with Hybrid Cloud control plane.
Beta announced!.
Launch of VCF 3.5:    Latest version of Cloud Foundation with incremental updates and cloud integration via HCX.
CloudHealth in VCS:    Integration of recently acquired CloudHealth in to the VMware cloud services (SaaS offering) portfolio which now extends the cloud platform cost monitoring and resource management as a SaaS offering with better cloud scalability than vROPs.
Pulse IoT center aaS:    IoT Infrastructure management solution previously available as an on-premises solution now available as a service.
Beta announced!.
New SaaS solutions:    Additional solutions are announced such as Cloud Assembly (vRA aaS), Service broker & Code stream to enhance DevOps app delivery & management.
VMware Blockchain:    Enterprise blockchain service inherently more secure than public blockchain that is integrated to underlying VMware tools and technologies for enterprises to consume.
Amongst these, there were also other minor incremental updates to existing tools and solutions such as vRealize suite 2018, Log Intelligence, Wavefront updates to provide application telemetry data (similar to App Dynamics) from container based deployments, vSphere & vSAN incremental updates, availability of vSphere platinum edition (with bundled in AppDefense) that learn (Good app behaviour), lock (the state in) and adapts security (based on changes to the application).

Adaptive micro-segmentation via integrating NSX & AppDefense

Increased geo availability of VMware Cloud on AWS (Ireland, Tokyo, N California, Ohio, Gov clud west), availability of AWS RDS on vSphere on premises to name few.

In addition to the above based on the previously established Any Cloud

Any Device & Any App strategy, VMware are also embracing different target markets such as Telco clouds by offering industry specific solutions through the use of their VeloCloud technologies, in preparation for the 5G revolution that is imminent in the industry and large telco Vodafone are helping VMWare co-engineer and test these solutions to ensure their business relevance.
So all in all.

There weren’t any attention grabbing headline announcements in this year’s VMworld event

but the focus was rather on providing evidence of the execution of that strategy set back in 2015/2016.
VMware’s increasing pivoting to Cloud based solutions is becoming more and more obvious as almost all the net new products and solutions announced within 2017 and 2018 VMworlds are all SaaS offerings managed by VMware.
This is a powerful message and customers seem to take note too, .

If the record breaking 12,000 attendees of VMworld 2018 Europe is anything to go by

As I mentioned at the beginning of this post, as these technology updates and new innovation is continuing, no doubt there will be additional use cases being realised, and the associated business requirements previously not envisioned being established.
In an age of rapid advancements of technology that often driving new business requirements retrospectively, I like how VMware are pushing ahead with a coherent technology strategy focused on providing customer the choice to benefit from innovations across these technology platforms.
VMworld 2018 2018, BlockChain, Cloud Assembley, CloudHealth, Code Stream, Europe, Heptio, , New Announcements, Project Dimension, Pulse, SecureState, Service Broker, VKE,.

ARR is based on your current MRR

11 SaaS Metrics to Measure (and improve) For Growth.
Metrics 101 The list of SaaS metrics you can measure and analyze is long.
some might say unnecessarily long.
Don’t get me wrong, data is a lovely thing to have at your fingertips .
Whether you’re trying to figure out how well your business is doing, want to find new opportunitie s for growth or any other info, having data is very helpful.
What’s not helpful though, is wasting your time tracking and analyzing metrics that:You’ll never use.
Don’t give you insights you can act on.
You don’t even know what to do with.
Instead of trying to track every SaaS metric known to man, what if you spent your time focusing on the ones most important to growing your business ?And instead of just looking at the numbers, what if you understood why you’re tracking them and what the numbers mean to your business?That’s the focus of this guide.
We’re going to go over some key SaaS metrics that are directly tied to y our company ’s growth.
I’ll define each and show you how to calculate them.
But more important ly, I’ll tell you why they’re important and what insights you can gain from each—in plain English.
SaaS Metrics.
Active customers.
Annual Run Rate.
Average Revenue Per User.
Customer Acquisition Cost.
Daily Active Users.
Expansion MRR.
Customer Lifetime Value .
Monthly Recurring Revenue.
Quick Ratio.
be honest.
How well do you know your business?.
Get deep insights into MRR, churn, LTV and more to grow your business Try Baremetrics Free 1.
Active Customers.
Active customers are users who are currently paying to use your product.
This excludes users on free trials, free plans, or are delinquent.
This is where your money comes from.
Why this SaaS metric is important:.
Some companies group everyone that has signed up for their product into one bucket, regardless if they’re paying them each month.
People on a free trial, people on free plans, people on paid plans, people who are technically still users, but didn’t pay you last month.
They just group them all together and call them “users”.
Separating active customers is helpful because it shows you how many people are paying you each month, not just the number of people using your product.
Here’s an example of why measuring active customers is important: Total Users vs.
Active Customers Month Total Users Active Customers January 500 300 February 800 380 March 1,100 440 In the table above, you can see that the number of total users is growing significantly month over month.
If you were grouping everyone together, you might think things are going well.
But the number of “active customers’ is growing at a much slower rate.
That means this business is primarily attracting users who aren’t paying them anything.
It’s difficult to grow a SaaS business when the majority of your users aren’t paying you.
Aside from the fact that you’re earning less money, you also have to keep in mind that even though free users aren’t paying you, they still require resources to support them. Rather than only looking at your total number of users, look at how your active customers are growing over time.
That’s a much stronger indicator of how your business is trending, especially if you offer a freemium pricing model.
Annual Run Rate (ARR).
Annual run rate, or Annual Recurring Revenue, .

Is your monthly recurring revenue (MRR) annualized

It’s a prediction of how much revenue your company will generate annually based on your current MRR.
ARR assumes that nothing else will change in your business over the year (no new customers, no churn, or expansion revenue).
How to calculate ARR.

Annual Run Rate formula MRR * 12 For example

if your current MRR is $5,000, your ARR would be $60,000 (5,000 * 12).
While ARR isn’t the most accurate way to predict how much revenue you’ll earn in a year, it can help you forecast and plan for growth.
Here’s how.
ARR is based on your current MRR, assuming that nothing else will change for the rest of the year.
Obviously, things will change.

But when you combine your ARR with your average churn rate and MRR growth

you can start to plan for how things like new product lines, pricing changes and campaigns will affect your revenue.
It can also be helpful for hiring, deciding how much to spend on marketing campaigns, etc.
By having an idea of how much revenue you’ll generate over the next year, you can make smarter decisions about how to grow. Learn more about ARR.
Average Revenue Per User (ARPU).
Average revenue per user (ARPU) is the average amount of revenue you earn from each of your active customers monthly.
How to calculate ARPU.
ARPU formulaMonthly Recurring Revenue / Active Customers For example, if your monthly recurring revenue (MRR) is $100,000, and you have 1,000 active customers, .

Your ARPU is $100 [$100,000 (MRR) / 1,000 (active customers)]

Notice that ARPU is calculated based on active customers, not total users.
A big mistake SaaS companies make when they’re calculating their ARPU is dividing their MRR by the total number of users.
But that skews your data.
Here’s why.
ARPU is based on revenue.
Since free users don’t contribute to your revenue, they need to be excluded from your calculation. Starting to see why “active customers” is an important metric to measure.

It’s easy to focus on MRR as the key revenue number for your business

But ARPU allows you to dig deeper into where your MRR comes from

One of the most obvious reasons you should track ARPU is because it directly correlates to MRR.
If you’re able to increase your ARPU, you’ll increase your MRR (assuming you’re not losing more customers than you’re gaining of course).
ARPU also gives you insights into the long term viability of your company, and your ability to scale. For instance, with an ARPU of $5, it’s going to be very difficult to scale because you’re dependent on having a large volume of customers.
And the more customers you have, the more resources you need to put towards support and engineering.
It can be tricky to make that profitable.
Lastly, ARPU helps you break free from the mindset that you need more customers to grow.
When you start thinking in terms of ARPU instead of just MRR and total number of customers, you’ll realize there are other ways to grow revenue like upsells and pricing changes.
In other words, instead of thinking “How can I sell more $30 shoes?”, think “how can I increase the value of my $30 shoes to $50?” or “Can I sell a $20 shoe cleaner along with my $30 shoes?”  Check out this article to learn more about ARPU and how to increase it.
Churn is the percentage of customers or revenue lost during a given period (usually monthly).
Most companies track two types of churn:Customer churn: Percentage of customers lost.
Revenue churn: Percentage of revenue lost.
Typically, when you hear about SaaS companies talk about their “churn rate”, they’re talking about customer churn (i.e.
the percentage of customers they lose monthly). But revenue churn is equally, if not more important. Customer churn only accounts for customers who’ve completely cancelled their account (i.e.
they’re not paying you any money at all anymore).
Revenue churn includes revenue lost from cancelled customers, downgrades, and other lost monthly revenue.
Here’s a simple way to think about it.
If you just want to know how many customers you’re losing month-to-month, then customer churn is a good number to track.

But if you want to see how much MRR you lost from those cancelled customers

then revenue churn is where it’s at.
How to calculate churn.
Customer Churn formula(# of cancelled customers in the last 30 days / Active customers 30 days ago) * 100 Revenue Churn formula(MRR Lost to Downgrades & Cancellations in the last 30 days ÷ MRR 30 days ago) x 100 If you use Baremetrics, you can see a breakout of what makes up your churn.
For instance, we show you customer churn broken down by cancellations and unpaid customers.
And we show your revenue churn broken down by downgrades, failed charges and cancellations, so you can see where you’re losing the most revenue.
If you want this data for your business, you can try Baremetrics for free here.
SaaS and subscription businesses depend on long-term customers to grow.
The longer you can keep customers paying you, the better. When you’re unable to keep your churn under control, it’ll eat away at your revenue to the point where your business is unsustainable.
No matter how many new customers you’re able to acquire each month, if you can’t get them to stick around long term you’re basically on a hamster wheel going nowhere.
That’s why it’s super important to actively analyze and reduce your churn.
Even if you have a low churn rate (say, 2% or below) you should constantly look for ways to keep it as low as possible.
For most SaaS companies, anywhere from 5-7% churn rate is considered “healthy”.
Once you start hitting over 10% monthly churn on a regular basis, it’s a sign that somethings off and you really need to do a deep dive into what’s going on with your business.
Luckily, we’ve written a ton about how to analyze and reduce churn before.
So if you’re interested, give these guides a read:6 Proven Strategies to Reduce Churn (With Real Examples).
Churn Analysis: A 3-Step Guide to Analyzing Your Churn.
How to Use Cohort Analysis to Reduce Churn & Improve Retention.
5 Ways to Prevent Involuntary Churn in SaaS.
Contraction MRR.
Contraction MRR is MRR lost from existing customers.
The lost revenue could come from customers downgrading their plan, reducing the number of users on their plan, missing their payment or anything else that decreases the amount of money an existing customer pays you monthly.
There’s one thing you have to keep in mind though.
Contraction MRR does not include customers who’ve cancelled.
It should only include revenue lost from customers who are still active.
Contraction MRR is important because it can be a warning sign of bigger issues. For instance, maybe customers aren’t getting enough value from your higher priced plans, so they end up downgrading.
Or if you charge per user, and the bulk of your contraction is coming from people reducing the number of users on their account, it could be that people don’t see a need to have multiple user accounts.
In most cases, contraction is a value issue.
People don’t feel like they’re getting enough value from their current subscription to justify the price (for whatever reason) so they downgrade or make other reductions.
The good thing though, is they haven’t cancelled.
They’re getting enough value from your product to keep paying you something, so all hope is not lost.
But you shouldn’t ignore customers who’ve downgraded.
There are plenty of steps you can take to improve your contraction MRR.
Start by tracking which plans users are downgrading from the most.
You can see this in.
Once you find the plans with the most downgrades, you can try experimenting with the pricing, adding more features to that plan, or maybe swapping it out for an entirely new plan level.
You can also reach out to customers who’ve downgraded to find out why.
Plus, you can automate that process with our Messaging tool.
I should note that some contraction MRR is completely normal.
The real issue comes when it’s increasing each month, or even outpacing your new revenue.
Customer Acquisition Cost (CAC).
Customer acquisition cost (CAC) is the amount of money you spend to acquire a new customer.
How to calculate customer acquisition cost.
In order to calculate CAC, divide all the expenses to acquire customers by the total number of customers acquired over a certain period of time.
Here’s the basic formula: Customer Acquisition Cost formulaCost to acquire customers / number of customers acquired Where some companies differ, is what they include in the “cost to acquire customers” number.
Some will include everything like advertising spend, salaries and tools, and others prefer to just include ad spend.
The former is a little more complicated to do, and the latter is a bit less detailed.
Whichever route you go, keep it consistent.
CAC is important because it helps determine the profitability of your business.
If you’re spending more to acquire customers than the revenue they generate, you’re not making money. Even if your MRR is going up each month, you’re not making money unless you’re able to get more money from customers than it cost you to acquire them.
To put it simply, your customer lifetime value (LTV) needs to be greater than your CAC if you want to build a profitable business.
This is your LTV:CAC ratio.
You have a lot of options for improving your LTV:CAC ratio:Lower your ad spend: If you use paid channels to acquire new customers, this is one of the easiest ways to lower your CAC.
You don’t necessarily have to decrease your advertising budget, but you need to optimize your ad spend by improving the quality of your ads, improving the conversions on your funnel, choosing different ad channels, or anything else that’ll allow you to acquire more customers for less money.
Grow organically: A good chunk of SaaS companies (particularly early ones) don’t even measure their CAC because they generally use organic marketing channels.
Things like SEO and word-of-mouth can dramatically lower the cost it costs you to acquire customers since they’re inbound marketing tactics.
Pricing changes: If you’re able to earn more money from your customers, you have more flexibility on how much you can spend to acquire them.
For instance, if two companies make a similar product and one charges $50/month while the other charges $25/month, the higher priced company can afford to spend a little more to acquire customers.
And even if they both have a CAC of $15, the $50/month company generates more revenue.
Keep in mind that just increasing your prices won’t magically improve your LTV:CAC ratio.
You need to experiment to find the sweet spot for your product’s pricing.
Daily Active Users.
Daily active users (DAU) are the number of users who open and engage with your app/software in a day.
How to calculate daily active users.
In order to calculate your DAU, you need to start by defining what an active user is.
Typically, an active user is someone who completes a specific function/task in your app. For example, for a social media management tool, an active user might be defined as someone who logs in and shares a piece of content.
For an email marketing tool, it could be someone who creates a new email campaign.
Or, it could be someone who uses your tool for a specific amount of time.
Once you define what an active user is, you just need to measure how many people meet that threshold on a daily basis to determine your DAU.
The reason DAU is important is because it gives you an understanding of the quality of users you’re bringing in.
When you measure DAU against other actions like logins or total users, it becomes super helpful.
Let’s go back to the email marketing tool example.
The purpose of your tool is for people to be able to send email campaigns.
So if users are logging into your product, but not creating email campaigns, there’s a disconnect somewhere.
Either you’re not attracting the right people, you need to improve your product UI, your onboarding isn’t great, or something else is causing a problem.
Either way, it’s a red flag that you need to address.
Expansion MRR.
Expansion MRR is additional MRR that comes from existing customers.
It could be from users who’ve upgraded their account, purchased an add-on product, added additional users to their account or anything else that increases the amount of money they pay you each month.
In some cases, you can build opportunities for expansion MRR directly into your business model.
For instance, if you sell a B2B SaaS product aimed at teams, you can charge per seat.
As your customer’s team grows, they’ll add additional users to their account, which creates expansion MRR for you.
Another good way to increase your expansion MRR is through add-on products, like what we’ve done at Baremetrics. By creating additional products that complement your existing product, you have an opportunity to upsell customers.
You can read more about this in our article: How to Improve Your MRR Growth Rate (without new customers)You can think of expansion MRR as the counter to contraction MRR.
Expansion MRR allows you to increase your revenue without having  to acquire new customers.
That means your growth isn’t 100% dependent on your ability to get new customers.
Baremetrics is living proof of how impactful expansion revenue can be to a SaaS business.
On any given month, our expansion MRR is greater than our MRR from new customers (you can check out our live dashboard here).
Look for opportunities to add expansion MRR through upgrades, upsells, add-on products or other channels whenever possible.
It’s a convenient way to grow a SaaS business that already has happy customers.
Lifetime Value (LTV).
You might not be able to quantify the value you get from your relationships in real life, but in the SaaS world, you can.
Customer lifetime value (LTV) is an estimate of how much revenue you’ll make from the average customer before they churn.
How to calculate lifetime value.
Lifetime value (LTV) formulaAverage monthly MRR per customer / User Churn Rate If you use Baremetrics, you can track your LTV over time: You can also see the LTV for any of your customers as well: We mentioned it earlier, but one of the main ways SaaS companies use LTV is to determine how much they should spend to acquire a new customer.
Ideally, your LTV should be greater than your CAC.
Remember your LTV:CAC ratio? A 3:1 LTV to CAC ratio is considered the “standard” in SaaS.
Meaning, if your average CAC is $100, you should get at least $300 from each customer before they churn.
If your CAC is greater than your LTV, or you just want to increase your LTV, there are plenty of things you can do:Adjust your pricing.
Reduce your churn time.
Optimize your CAC.
Increase your expansion MRR.
Check out this article to learn more about LTV: How to Calculate Customer Lifetime Value 10.

Monthly Recurring Revenue (MRR)

Monthly recurring revenue (MRR) is the amount of revenue you get from your customers on a monthly basis.
However, MRR is different from the total revenue of your business.
For instance, if you have a SaaS business and also sell additional one-off services like setup fees, consultation or any other non-recurring payments, those shouldn’t be counted towards your MRR.
Just like the name suggests, your MRR should only include revenue that comes in from recurring payments/subscriptions.

You can break your MRR into two groups:New MRR: MRR gained from new customers

Expansion MRR: MRR gained from existing customers (through upgrades, upsells, etc.).
And just like you can gain MRR, you can also lose it from cancellations and contraction.
How to calculate MRR:.
The basic calculation for MRR is simple.
You just add up all the revenue you get from your active customers.
However, it gets a little more complicated when you start to include things like annual plans, coupons, and late payments.
That’s why most SaaS companies use tools like Baremetrics to handle the calculations for them.

To learn more about how we calculate MRR in Baremetrics

check out our help article here.
And if you want to analyze your MRR, you can give our tool a try for free here.
It should go without saying, but you need MRR to keep your business going.
Tracking and analyzing your MRR helps you see into the health of your business.
Is your MRR increasing, decreasing or staying relatively flat over time?If your MRR is increasing, it means more revenue is coming through the door each month, which is great.
You’re bringing in more revenue than you’re losing, and hopefully you have a healthy MRR growth rate (learn more about what MRR growth rate is and how to increase it here).
On the other hand, if your MRR is trending in the opposite direction, it could mean things are slowing down.
However, you shouldn’t freak out if your MRR goes down a month or two sometimes, it’s perfectly normal. But if you have long periods of declining MRR, you need to dig into what’s going on.
Are customers churning at a higher rate than usual.
Are you not bringing in as many new customers.
Are you missing out on opportunities for expansion MRR?The more you understand about where your MRR comes from, and how it’s trending, the easier it is to make a strategy for growth.
And that’s where tools like Baremetrics come in handy, to allow you to dig deeper into your business and go beyond just knowing what your metrics are.
Quick Ratio.
Digging into your SaaS metrics and analyzing the numbers is something every founder should do.
But sometimes, you just want a quick look at how things are going and your growth trajectory.
That’s when your SaaS Quick Ratio can be helpful.
The Quick Ratio is a number that tells you how efficiently your company is growing with its current revenue and churn rate.
Generally, the higher your Quick Ratio, the more efficiently you’ll be able to grow your SaaS business.
How to calculate SaaS Quick Ratio.
Quick Ratio formula(New MRR + Expansion MRR) / (Contraction MRR + Churned MRR) New MRR: MRR from new customers.
Expansion MRR: Additional MRR from existing customers (i.e.
Contraction MRR: MRR lost from existing customers (i.e.

Churned MRR: MRR lost from customers who’ve cancelled

The point of the Quick Ratio is to tell you how efficient and sustainable your growth is.
The best way to show the value of Quick Ratio is with an example.
I’ll steal one from this article.
Let’s take three companies that all have net MRR growth of $10,000.
Quick Ratio Example Header New + Expansion MRR Churn + Contraction MRR Quick Ratio Company 1 $12,000 $2,000 6 Company 2 $15,000 $5,000 3 Company 3 $20,000 $10,000 2 Company 4 $50,000 $40,000 1.25 While each company nets the same $10,000 MRR, the way they get there is much different.
Company 1 has the ideal scenario, because if they’re bringing in a lot more MRR than they’re losing each month. Even though Company 4 has more incoming MRR, their churn is eating away at their growth, and they’re probably a few churned customers away from not making any money at all.
They have much less wiggle room than the other companies.
Your Quick Ratio shouldn’t be the end-all-be-all for your company since there are a lot of factors that go into it.
But it can give you a good glimpse into where your company’s headed, especially when you measure it over time.
If you’re curious about what your company’s Quick Ratio is, you can see it in Baremetrics.
Focus on the SaaS metrics that matter most.
Like I said in the beginning, there’s a laundry list of SaaS metrics you could measure.
But the reality is that a lot of them aren’t things the average SaaS company is going to act on. The metrics we went over here are a great place to start.
If you regularly track and analyze them, they’ll give you amazing insights into how your company is doing today, plus what steps you need to take to grow in the future.
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