Use a Subscription Management Solution as the Foundation for Your SaaS Metrics

In this article, we want to cover why a subscription management solution is imperative as a source for your SaaS Metrics. If we look at the most common metrics you’re most likely thinking about MRR and Churn. I’d say you’d be right! Both these metrics are triggered by a subscription, MRR is triggered at the start of a subscription and Churn at the end.

The initial term defines the start of the MRR and the revenue schedule defines the spread. Typically in SaaS even though many companies invoice annually in advance we see the MRR is spread over the year month by month. Subscription Management systems like Younium not only forecast the MRR for the initial term but the Younium recently updated Insights module also forecasts MRR based on renewal behavior and opportunities. Churn or Partial Churn causes the MRR to drop or deplete all together which again is an effect of the Subscription changing. Therefore the two most known SaaS metrics are already directly linked to Subscriptions.

SaaS would be a boring industry if we only had customers starting and ending their subscriptions. However, the main reason SaaS is such a growth engine is because of the constant changes and long-term relationships we have with our clients. Typically we re-iterate our pricing, launch new monetized modules and try to have some sort of value based pricing that grows with your customer’s usage of your solution. That also means your subscriptions are not static but the agreements are very much alive throughout the relationship. If your customer decides to add that great module you recently launched to their subscription the subscription changes to a new version but that also means MRR changes. If after a year the customer cancels the module it is visible in partial churn through an MRR reduction. If we look only at MRR and Churn we miss the reason as to “why” and “when” MRR grows.

Then let’s take it one step further and talk about bookings. Bookings are basically ‘the event’ where things happen. A booking can be a closed deal, on the date it was actually closed (not always the same day as  when the subscription starts). It can also be the day the customer called you that they unfortunately moved to a competitor. 

The booking is the date that represents the moment of impact that caused the change in your business performance.

Unfortunately less than half of the SaaS companies out there use bookings as a metric. Bookings are the best thing coming from a Subscription Management solution. Every creation of - or change to a subscription generates an automatic booking. That booking can always be referred to in order to spot the upsell that triggered the change. Without bookings you can’t really understand what caused your MRR to change and at what point in time that change really was triggered.

Let’s use a very common example of why understanding the subscription bookings really gives the business intelligence you’re looking for which simply cannot be tracked on an excel sheet.

On February 17^th you had a huge downtime with your solution, it was the 3^rd time that month but this one lasted for 8hours and your solution is business critical. 12 customers got so upset that they cancelled their subscription that day immediately. But their service periods all ended on different days in the year, one in March, one in June and one in September. That means there’s going to be 3 different drops in MRR. So it is near impossible to understand what was the cause if you didn’t track the booking that triggered the Churn. If you would report the booking you would see all 3 churns even though revenue stops at 3 different points were all caused on the same day and you know if you don’t fix your platform stability it will happen again. Same with a launch date on a specific module, maybe customers sign up for it on launch date but they add it per their new subscription renewal which similar to previous example can be spread throughout the year and it’s going to be very hard to track the reason for sudden spread MRR changes.

This is what true Business Intelligence does. It shows you the things going very right and very wrong for you to take action accordingly. But everything is triggered by “bookings” or “subscription events” coming from the Subscription Management Solution.

If you really want to know what goes right and wrong in your business, subscription management solutions are the key source of your Business Intelligence. They provide you with visibility on the blind spots and show both the cause (bookings) and effect (MRR) of your business to ensure you invest in the right things which is nowadays more important than ever! Explore our product tour below to see how Younium helps you understand your finance data, subscription insights dashboards, churn, cashflow, SaaS metrics, and KPIs.