Analyzing your subscription business

Having detailed insights into how your business is performing, is vital for any business. For a subscription business this is no different. If done correctly it can actually become a competitive advantage.

Despite the importance, many companies struggle with measuring their key performance indicators (KPI) outside the mandatory financial statements like P&L and Balance. So many ask themselves: ”What are the correct KPI’s for my company and how can I monitor them real time, in order to optimize my business?”

I have personally experienced that a subscription business tend to struggle even more with KPI’s, because of the complexity in their business. Often performance indicators are limited to a number of customers and revenue per customer. The various ERP solutions have a few tools -if any- to extract the intelligence needed by a subscription business.

At Reepay we focus on delivering subscription optimized performance indicators, so you can track how your business is performing and trending. The Reepay Statistic section in the Admin tool is developed to give you all you need to run and optimize your subscription business.

Below you will find a run-down of the indicators we provide free of charge with your Reepay subscription.

MRR (Monthly Recurring Revenue)

Monthly Recurring Revenue (MRR) is one of the most important metrics a subscription business needs and is a calculation of your normalised (amortized), monthly subscription revenue.

If your business only have monthly subscriptions, the MRR is the price paid each month of the subscription. So if your customers are paying for more than one month up front (e.g. 6 months) it is the amount paid for the subscription divided by the number of months in the subscription period.

MMR is important to track, because it tells if your revenue stream is going in the right direction and are not diluted by customers having more than one subscription, or if subscriptions are paid in advance.

Average Revenue Per Account (ARPA)

The average revenue across your active customers. This could for example tell you, if your activities to upsell to your customers are working or maybe even more important, if they are not.

Customer Churn Rate

The rate at which your customers are cancelling their subscriptions. It is difficult to know what a normal churn rate is, as it completely depends on what type of business you have. It is a part of the calculation of Life Time Value Below.

Annual Run Rate

This shows the size of your revenue the next 12 months if the present trend continues.

Customer Lifetime Value (LTV)

An estimate of the total subscription value of an average customer. Useful for determining how much to spend on customer acquisition.

More, soon to come

We want to give you even more insight with Monthly Recuring Revenue (MMR) Movements. MMR movement is very important. The MMR movements report shows where you lost and gained revenue.

  • New business MRR – New customers signing up will generate new MMR. This is all new acquired customers and basically it shows how well your inbound sales works.
  • Expansion MRR – Any increase in the MRR of an existing customer. Hence an increase in quantity, upgrade to a higher plan, adding a 2nd subscription, or a discount expiring. Shows how well you up-sell to your customers.
  • Contraction MRR – Any decrease in MRR. Hence a decrease in quantity, downgrade to a lower plan, or a discount being added.
  • Churn MRR – The MRR at the time a customer cancels (or fails to renew) their subscription.
  • Reactivation MRR – When a previously churned customer moves back onto a paid plan.

Summary

As more and more businesses embrace the subscription model. The need to look into the data generated by the subscription customers becomes increasingly important in order maintain or build a competitive advantage.

The subscription data holds the key to understand your business better and just as important, where you can plan your business and take corrective actions. The Reepay Statistic section in the Admin tool is developed to access to all the insights in your subscription data that you need to run and optimize your subscription business.

Don’t hesitate to reach out if you have questions for feedback.