This transcript was generated from the episode audio and may contain minor errors.
[Music]
What are the key performance indicators that you should track? You should keep an eye on. What are the metrics you should look at when you're trying to monitor a very small business? We're gonna hear today from a caller who has a SaaS business, that's Software as a Service, they're basically selling a subscription. They have 50 paying customers, which is covering their costs.
They're hoping to go to growth mode soon, increase that number. But they're also wondering like, what should we actually keep track of? What are the key metrics, let's say a couple of them, so that we can actually figure out how to grow the business? His name is Devin, he's gonna talk about it a bit more. We'll see what we can do to find the right thing to monitor.
This is really important. If you have a SaaS, you need to know a couple of things to keep an eye on, not many, not many at all, just a couple of things. So let's talk about it right after this quick shout out to our sponsor. [Music]
Hi Chris, I'm Devin. Calling in hopes you can give me some advice.
My two person software service serves about 50 paying customers. Enough to cover our costs, but I'm drowning in dashboards. Stripe MRR, churn, expansion revenue, NPS. Every blog says track everything and I'm losing my mind. At this micro stage, what really matters?
We could watch only two or three KPIs that genuinely guide decisions like price bumps or feature priorities. What should they be? [Music]
The one principle of Side Hustle School and the book I wrote, Side Hustle, is you really shouldn't try to keep up with everything. You should pick a couple of key metrics and that should determine how you decide like how well the business is going. And so at this stage for Devin, his goal is momentum.
He needs some growth to get this business up and running. So he's not just covering his costs. And with this kind of business, basically once he has his costs covered, every new customer is almost pure profit. So that's great. So typically with this kind of subscription business, you want to keep an eye on monthly recurring revenue.
Like ignore the absolute monthly revenue number for a moment and focus on direction. Like what is the trend? What is the MRR this month compared to the MRR last month? And if your Delta is positive three months in a row, you're growing. If it's flat or negative, that's not good.
You're not growing. That's what you need to pay attention to. And perhaps maybe with this business as well, churn matters a lot. Like how many people are canceling? Especially when you only have 50 customers.
So if you lose two customers in this situation, that's a 4% churn. So keep an eye on the number of cancellations divided by the starting customer count and do your best to keep under 3% per month. If we had to pick one more thing, let's say product engagement, pick one action that correlates with stickiness, like people who are logging in every day or like a weekly report, whatever makes customers get value and just monitor the percentage of customers who hit that action at least once a week. 'Cause if the engagement drops, then the churn is going to follow. Like if people stop using your service, they're eventually going to cancel.
They might not notice for a while, but eventually they will. So this metric is your early warning radar. I think those are the three things that you should keep an eye on in this business. And listeners, if you're in a totally different business, they might not be your metrics. But again, just pick a couple of things, three maximum, and focus on those things.
Like do everything you can to keep those things growing. Everything else kind of takes care of itself if you get the core things right, especially in a side hustle when you have limited time. That's my advice to you. Thanks for tuning in today. Gonna respect your time by signing off, wishing you a good day.
I hope you do something to get closer to a goal you believe in. Of course, new episodes drop all the time. You can subscribe, follow, download the complete archive at the website. But for now, my name's Chris Guillebeau. You are listening to "Side Hustle School." [Music]
from The Onward Project.
