Fri. Jun 14th, 2024

Subscription businesses are a hot trend worldwide. And this is easy to see since the subscription business model seems to work for almost any industry. However, running such a venture is not a piece of cake as it sounds. No wonder most entrepreneurs make the mistake of measuring subscription business KPIs similar to businesses that rely on one-time sales.

Even though they might not see flaws with this decision, it could cost them in the long run. After all, this doesn’t give them the entire story they desire. Keep in mind subscription businesses leverage recurring revenue to maintain strong profit margins.  That means you should do all it takes to keep your customers happy and track key metrics. 

Skimp on this, and your subscription business may fall down the pecking order sooner or later. Rather than turning a blind eye as this happens, it pays off to know the key metrics you should track.  Below are three subscription metrics to track and drive business growth hassle-free. 

Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue (MRR) is about the total amount of predictable revenue you expect to receive in a month.  Keeping tracking of this metric helps subscription business owners understand the existing month-to-month differences in their venture. You can view it as the average of different billing periods and pricing plans. 

Even though you might not deem this metric vital, it is the lifeblood of your subscription business.  You want to keep a close eye on your subscription growth, and it is possible when you evaluate your MRR. In short, you should use this metric to determine what is derailing your subscription business from realizing the set goals. 

Customer Lifetime Value (CLV)

One of the most important subscription business KPIs to track is Customer Lifetime Value (CLV). In a nutshell, this metric looks into the total revenue to expect from a single customer while using the service.  If the revenue is less than the costs of acquiring the customer, rest knowing your subscription business is making significant losses. 

You don’t have to go overboard merely because you want to calculate the CLV for your subscription business.  Either way, it is in your best interest to separate values for cost per acquisition.  Once all the factors are in place, you only have to deduct the cost expectancies from the revenue you project during the customer’s lifetime. Remember, CLV is vital for decision-making in a subscription business. 

Retention Rate 

The retention rate metric looks into the percentage of customers a subscription business retains in a specified period.  There is no way your business will remain afloat if it fails to achieve customer satisfaction.  And since you want to give your competitors a run for their money, you need to know how many customers stay with you. 

By leveraging the retention rate metric, rest assured you will keep your customers happy over their lifetime.  However, you need to  analyze this metric in detail continuously to reap maximum benefits. While you want to retain all the customers you acquire, you’ll lose some on the way.

Final Thoughts

Now that you have an insight into the subscription business KPIs you should be tracking, it is time to focus your efforts on improving these numbers. Ensure you do your homework to understand what each metric can do for your subscription business.  That way, you can rest assured your new business model will be a force to reckon with in the industry. So, what are you waiting for to measure the above and other key metrics for your subscription business?