Running a business can often feel quite daunting (not that I am talking from experience! 😉 ). You’re trying to balance growth, manage your team, and keep customers happy, all while fending off the occasional disaster. By now, we can probably assume you’ve mastered the fundamentals of keeping your revenue engine running. Metrics like Monthly Recurring Revenue (MRR), Gross Margin, and Customer Acquisition Cost (CAC) are your bread and butter. Or are they? If you don’t have a solid handle on these, that’s your starting point. But once you’ve nailed the basics, there are other KPIs that will help you have that ‘North Star’ under control, and to steer your company in the right direction – with finesse. 

For many SMBs, the challenge lies in what happens after you establish a foundation. Businesses often get stuck tracking only the most obvious metrics. And those are ok. Truly necessary. But the problem is that they’ll give you a general sense of direction, but they won’t guide you with precision toward long-term growth.

That’s why it’s time to go deeper. Some metrics aren’t as common or straightforward to track but can have a profound impact on your business. They help you see patterns, pinpoint inefficiencies, and uncover opportunities you didn’t even know existed. These hidden gems allow you to proactively shape your strategy rather than reacting to surface-level data.

Let’s take then a closer look at the strategic metrics that go beyond the basics and see how to apply those in your day-to-day, be it to monitor your own progress, or to report those to the boss. 

Making the metric-nerds tingle

1. Net Revenue Retention (NRR)

Why It Matters

I can’t believe how long it took me to get acquainted with this metric. And how essential it’s become since to blend customer happiness with overall growth. The ability to acquire new customers is just one piece of the puzzle, with the other being the long-term retention of those customers and facilitating more expansion revenue.

NRR measures your ability to retain and grow revenue from your existing customers. Unlike churn rate or MRR alone, NRR combines upsells, renewals, and downgrades into one powerful metric. High NRR indicates that your customers are not only sticking around but also spending more over time.

How to Calculate

For example, if you start the month with €100,000 in revenue from existing customers. During that month you sell €30,000 (from upsells and new business) and lose €10,000 through churn. In that scenario, your NRR would be 20%, as described in the formula below.

What is a good NRR

As a general rule of thumb, a financially sound company would have an NRR in excess of 100%.

If the NRR is greater than 100%, the company is likely to expand rapidly while remaining efficient with its spending and capital allocation relative to competitors with a lower NRR.

NRR >100% ➝ More Recurring Revenue from Existing Customers (i.e. Expansion)

NRR <100% ➝ Less Recurring Revenue from Churn and Downgrades (i.e. Contraction)

A company with an NRR in the ballpark of 100% is perceived positively, i.e. that the company is on the right track.

Top-performing SaaS companies, for example, can far exceed an NRR of 100% (i.e. with NRRs of >120%), but most set a target of around 100%.

In short, the higher the NRR, the more secure a company’s outlook appears, as it implies that the customer base must be receiving enough value from the provider to remain.

What to Watch For

  • Upsell Opportunities: A high NRR often signals effective upselling strategies.
  • Retention Weakness: NRR below 100% means you’re losing more revenue than you’re gaining.

Therefore, NRR takes the MRR/ARR metrics a step further by describing a company’s recurring revenue fluctuations attributable to factors like expansion revenue (e.g. upselling, cross-selling) and churned revenue (e.g. cancellations, downgrades).

Given enough time, a low NRR will catch up to a business and cause ARR to slow down until the underlying problems are fixed.

2. Customer Health Score

Why It Matters

Not all customers are created equal. The Customer Health Score provides a predictive measure of how likely a customer is to churn or expand their business with you. It combines factors like engagement, product usage, and satisfaction to give you a clear sense of customer well-being.

How to Calculate

Customer health scores can get pretty complicated. We’ve seen some that include dozens of metrics. But it doesn’t have to be that way. You can build a useful health score from a handful of inputs. After all, your health score won’t be helpful if no one understands it.

Customer Health Score is often a composite score, weighted by factors like:

  • Product Usage: Are customers actively engaging with your platform?
  • Support Tickets: Are they encountering frequent issues?
  • Net Promoter Score (NPS): How satisfied are they?

These might vary, depending on which KPIs are most important for your business in particular. You could pick, for instance, Customer Success Pulse as a key one, as well.

Assign scores to each factor (e.g., 1-10), and calculate a weighted average. 

Not every score in your list will be equally important. For this reason, each action should have a weight attached to it that quantifies its impact on a customer’s health. You will want to specifically examine the actions taken by churned customers and customers on your highest price tier. The strength of the correlation between the two shows you the impact particular actions can have. 

As such, the strength of calculating this score lays on its evolution, rather than on a standalone picture. 

What to Watch For

  • High-Risk Customers: Use this score to identify accounts at risk of churn and intervene early.
  • Expansion Potential: Healthy customers are your best candidates for upselling and renewals.

3. Time to Revenue (TTR)

Why It Matters

Time to Revenue measures how long it takes to convert a lead into paying revenue. While many businesses focus on sales cycle length, TTR includes the entire process—from first touch to when the customer starts generating income for your business.

Businesses prioritize TTR in their pursuit of growth and profitability. A shorter TTR can significantly impact profitability, fostering growth and providing a competitive advantage in the market. Furthermore, TTR highlights a company’s adaptability to market shifts and evolving customer needs. It also offers a lens into the alignment between product development, marketing, and sales efforts.

An optimized TTR indicates that a business can swiftly move from ideation to revenue generation, a crucial attribute in fast-paced markets. Moreover, investors and stakeholders often view TTR as a barometer of a company’s potential for rapid returns, making it a vital metric for attracting investments and building trust with investors.

How to Calculate

The formula to calculate TTR is:

TTR = (Break-even point / Sales per period) +1

Where the break-even point is where total costs equal total revenue, indicating no net loss or gain. Sales per period refer to the average sales generated in a specific timeframe.

What to Watch For

  • Bottlenecks: Are there delays in your sales or onboarding processes?
  • Segment Differences: Does TTR vary significantly across customer types or acquisition channels?

4. Customer Retention Cost (CRC)

Why It Matters

While CAC gets a lot of attention, the cost of retaining customers is just as crucial. CRC gives you insights into how much you’re spending to keep your existing customers engaged, satisfied, and loyal.

Acquiring new customers is at least 5x costlier for a company than retaining existing ones. And depending on your industry, this can be significantly higher. At a time when customer retention is of supreme importance to businesses, especially SaaS, the better you understand your CRC, the more effective you’ll be when investing in this side of operations.

How to Calculate

To calculate your customer retention cost, add the total expenses related to retaining customers and divide it by the number of active customers.

For example, if you spend €10,000 on retention programs and retain 500 customers, your CRC will equal €200. 

What to Watch For

  • Program Efficiency: Are your retention strategies delivering ROI?
  • Benchmarking: Compare CRC to CAC to ensure you’re balancing acquisition and retention investments.

5. Lead-to-Revenue Conversion Rate

Why It Matters

On several occasions I’ve found myself talking to CEOs who measured Marketing success purely looking at the number of leads that those had generated through campaigns. This is a rookie mistake. Marketing, like any other GTM functions, needs to be measured on their direct impact to revenue. Leads can be made up, it’s all a matter of making up some nice scoring where any contacts are created through any meaningless interaction, even if we know that most of those will never become clients. 

As such, Lead-to-Revenue tracks the percentage of leads that successfully convert into paying customers. It gives you insight into the quality of your leads and the effectiveness of your sales process.

How to Calculate

Calculating your lead conversion rate is straightforward. Take the total number of converted leads (within a given time period), divide it by the total number of leads (within that same time period), and then multiply by 100.

For instance, if 50 out of 1,000 leads become customers. Easy, your Lead-to-Revenue is 5%. 

What to Watch For

  • Lead Quality: Are your marketing efforts attracting the right audience?
  • Sales Process Gaps: Low conversion rates may indicate inefficiencies.
  • Lead Scoring: do you have a solid way of scoring touchpoints and interactions with contacts?

One step beyond

Revenue metrics aren’t just numbers, they’re your business’s pulse, roadmap, and warning system all rolled into one. While foundational metrics like MRR and Gross Margin help ensure stability, metrics like NRR, Customer Health Score, and TTR offer the strategic insights that fuel long-term growth.

But these aren’t the only tools at your disposal. Yay! There are more! Metrics such as Expansion Revenue, Product Adoption Rates, and Operational Efficiency Ratios add even more depth to your understanding of your business’s performance. Together, they form a complete picture of your company’s financial health and growth potential.

The beauty of platforms like Tinkery is their ability to simplify this complexity. By automating data collection, cleaning, and analysis, Tinkery not only helps you track these metrics but also provides actionable insights to improve them. With the right tools and the right mindset, you can transform data into a strategic advantage, and take your business to new heights.

The next step is yours: start tracking, digging deeper, and optimizing for the future.

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