What Metrics To Use When: The Science of Measuring Each Stage of Your SaaS Startup [Part 1]

As you may now know, there are countless KPIs and metrics we measure to tell us how our businesses are doing. In many cases, however, we get confused and lose sight of what’s important and end up focusing on metrics that don’t mean anything.

For SaaS businesses, there are several core metrics that should be focused on, like the ones we talked about in detail in this post. But the priority of these metrics shift as your business develops and grows. If you only had paying customers for 3 months, it does not make a lot of sense to track the LCV or Lifetime Customer Value. But at a later time, LCV will be an essential metric.

As we dig in deeper into each stage and the metrics that need to be focused on, this post will help you understand that:

• By keeping your focus on only a few key metrics, you will put your undivided attention on the core problems that you need to address and solve to bring your business to the next level.
• Data is pretty useless not unless you act on it. The metrics you focus on will tell you how you’re doing and will immediately show you which area of your business needs more attention.
• Every stage of your business growth has two metrics that will balance each other out. By focusing on these metrics, you will be kept from over-optimizing a metric and harming the health of your business in the long run.

Stage 1: Before/Right After Product Launch and Finding the Product/Market Fit 

So you have decided to push forward with your SaaS startup and you are planning to dominate the world. But before you can start building your “Death Star”, you have to make sure that you have the right product and that it’s laser targeted for the right market.

At the onset of a product launch, it can be expected to usually have a disconnect between your product and the market, with customers not quite wanting what you have to offer. When this happens, you can either change your product or go after a different target audience. Until you get the perfect match—a product wanted by a target market—you have to look for what we call the “Product/Market Fit”, which is discussed in detail by THE Sean Ellis HERE.

This is the first stage and you will know you are here if:

• You have just started your business.
• You are still looking for the ideal customer.
• Users/visitors are testing or trying your product for the first time.

This is the first major obstruction you need to overcome. But if you don’t have data, how do you measure your progress at this stage?

At this point, running activities such as A/B testing won’t work in testing your business model, simply because you have no (or not that many) paying customers to provide you the data. The best way to go about this is by running qualitative tests.

With the qualitative tests, you should achieve the following:

• Validate core business assumptions by interacting with the people from your target market. If they ask for your product before you sold it, you are on the right track.
• Have at least 40% of your survey respondents say that their life would be disappointing if they stop using your product.

So what are the metrics that matter at this stage?

1. Qualitative Feedback

While this is obviously not a metric, this is pretty much the only data you can go by at this point since you won’t have a lot of paying customers at the onset, if any. Your goal now is to build the right product and offer it to the right market. The fastest way to find out both is to start talking to people and potential customers.

If you already have a few users at this point, you can talk to them via Skype and have FGDs (focus group discussions). This way, you can dig deeper and have a better understanding of their problems. Get an input on how they are solving the problems that you are looking to solve. Then you can show them the solution you’ve been working on and see if they find it relevant and exciting.

Start with 10 to 20 people and follow this format:

• Get a better sense of who you’re talking to by asking basic demographic questions.
• Ask deep questions about the problem they (and you) are looking to solve.
• When you present your solution, don’t sell, just ask for feedback.

If you don’t have any customers (both free and paying) at this stage, what you can do is talk to people who you think would be interested in your product. This way, you can test different target markets. After all, it’s easier to setup 10 Skype meetings than it is to re-brand or rebuild your product.

While there are quite a number of survey options for harvesting feedback (at a later time, you’ll surely need them) such as SurveyMonkey, Qualaroo Surveys and usability tests via UserTesting.com, the insight you receive will be deeper and better for your business.

 2. Product/Market Fit Measurement

 Let’s look back at our #2 goal: “Have at least 40% of your survey respondents say that their life would be disappointing if they stop using your product”.

Measuring product/market fit objectively is going to be really difficult, we won’t kid about that. How do you know if people are really interested in your product? Are you just focusing on the positive feedback and downplay the negative feedback because you have too much faith on your product?

Survey.io hits this mark right on with an excellent survey question you can send to your customers that will help you measure whether or not you’ve found the right product/market fit.

Ask:

How would you feel if you could no longer use our product?

1. Very disappointed
2. Somewhat disappointed
3. Not disappointed (it is not really that useful)
4. N/A—I no longer use this product

Groovehq also ran the same Product/Market Fit survey, with impressive results. 

Say you have 50 people using your product (free, trial, or paid), send the questionnaire to those who have used your core product at least twice in a duration of two weeks. Again, your goal is to have at least 40% who answer “1. Very Disappointed”. This will quantify (and qualify) that you can indeed build a scalable and sustainable growth with your product.

If you get results below 40%, you would most likely have difficulties getting the product off the ground, but then the survey results will help you focus your efforts and reposition your product to finding a better product/market fit.

Final Thoughts 

In this part, we learned that at the onset of your business, there aren’t a lot of data to work with, so what you can focus your energy on is in finding out if your product matches the needs of your target market. Finding the right market/product fit may be challenging, but by harvesting feedback from your early users through one-on-one or FGDs via Skype, you can reinforce your early development with valuable input from your customers. In the 2^nd part of this 3-post series, we will talk about the metrics you’d need to focus on as you are beginning to scale.

The post What Metrics To Use When: The Science of Measuring Each Stage of Your SaaS Startup [Part 1] appeared first on Abacus Metrics.