Dave McClure’s Pirate Metrics have been the de facto way of viewing the SaaS funnel.
Ok, but how do I choose what metric to focus on?
You’re in the right place. Let’s go.
Jaana Kulmala beautifully breaks down the specific measures that fall under each Pirate Metric:
Now, how do I choose among these metrics?
The answer is identifying your current bottleneck. Ash Maurya details how to identify the riskiest part of your business at the moment. At any given time, there’s 1 part of your funnel that needs the most attention.
Let’s break it down.
1. Need new/more business?
- Traffic/Visits to your online property is the answer if you need the world to know about you. The key bottleneck is having a chance to show your offer. Everyone starts here
- Conversion Rate and Customer Acquisition Cost are your greatest bottlenecks if you’re getting traffic, but your funnel is leaking out the traffic you’re getting. You need visits to end up with a sign up at a justifiable cost.
- Retention/Lowering Churn is your main thing if your leads don’t end up coming back to hear out your offer.
- Virality is what you want when you have happy customers. You each of them to bring in more referrals and at a faster rate.
2. Need to nurture existing customer relationships?
- Retention/Lowering Churn is your key metric if you want customers to subscribe again or buy an equal product for a later time (e.g. next year’s version of your offer). This is like creating new business. That’s the beauty of the SaaS model. A customer relationship is a gift that will keep on giving.
- Revenue Per Customer (Monthly Recurring Revenue/Annual Revenue Per User/Customer Lifetime Value) should get the spotlight if you want a deeper business relationship. This is different from retention because it increases the amount of value you provide and money you earn from each customer. This is about upgrading a customer’s package, with the chance of even higher margins. Unlike retention, this is about providing more value per amount of time.
There you have it. If this has been useful to you, cheers for taking your metrics seriously. I invite you to dive deeper by ranking your metrics in order of importance. Identify the #1 metric that should serve as your North Star.
NOTE: Ready to set a target based on your selected metric? Follow this free guide