The monthly recurring revenue (MRR) metric is one that SaaS companies with a subscription-based pricing model need to keep a close eye on. MRR measures the total revenue that a company will accumulate on a monthly basis. Having a firm grasp on this figure will help you to understand how much your company is growing (or not growing) and what the projections are for the future.
Accuracy is essential when calculating MRR
To make strategic marketing decisions, you need access to relevant data. When calculating MRR, you'll need these numbers:
- The total monthly revenue generated by all customers.
- The average amount paid by all customers per month.
- The total number of customers.
From here, you can calculate New MRR, Expansion MRR, Churn MRR, and Net New MRR.
"MRR is the most important metric for financial growth."
– Dan Tyre, Sales Director at HubSpot
Why do SaaS businesses struggle with MRR growth?
Steady growth in monthly revenue is a good indicator for most businesses, but SaaS companies need much more acceleration when it comes to momentum and sustainability. As a result, many will attempt varied marketing tactics to boost retention and prevent churn. However, these activities don't often lead to long term success.
This is because their efforts lack direction or aren't ideally aligned with the needs of their target audience – if they know who their target audience is. Some marketing teams confidently hash out customer profiles based on loose ideas that don't take into account the complexities of their buyers – or even the complexity of their own service.
Partnering with an inbound agency that has the experience and a proven track record with SaaS businesses could help you to not only understand MRR better but to also build a marketing strategy that will mobilise all the tools and strategies to get real results.
Why inbound marketing and SaaS are a perfect match
SaaS businesses need a high volume of high-quality leads in order to maintain a competitive MRR and ARR. Studies show that in order to remain relevant and profitable, software companies need to grow more rapidly than firms in other sectors.
That's because a significant portion of your income has to go back into improving your product, rolling out upgrades, and keeping up with customer service demands. Stagnating the development of your SaaS product is a sure-fire way to exit the market.
According to McKinsey, the maxim that all SaaS companies should operate by is: "Grow fast or die slow." Their research backs this by showing that a SaaS company growing at an annual rate of 20% will have a 92% chance of ceasing to exist within a few years.
The globally recognised consulting firm suggests that SaaS growth happens in three phases:
- The first involves testing to make sure the solution is a right fit between the product and the market.
- In the second phase, the company will position its offer for growth by focusing on the needs of the customer.
- Once targets have been reached, the third phase calls for a capital injection into a second scalable offer.
This model suggests that driving revenue growth – more specifically, MRR – in the beginning stages of your SaaS venture, is an essential part of scaling and sustaining your business further down the line.
And that's where inbound comes in...
The inbound methodology is applied by attracting, engaging, and delighting the customer. For a service-based business model, success in all three of these activities is crucial. This is because you need to humanise your product for the consumer, gain their trust by proving your reliability and resourcefulness, and continuously delight them by enhancing your software to suit their current and future needs.
Inbound's flywheel model helps SaaS companies to automate processes and build momentum in the areas that generate valuable qualified leads.
Through effective leveraging of content and suitable media platforms that align with the strategy you've built around your buyer personas, you can remove expensive and short-lived marketing tactics out of the equation. What's more, inbound marketing strategies are based on real data, helping to increase your business' responsiveness to market changes and customer needs when it matters the most.
If you'd like to recap your knowledge of inbound, here's an insightful video from HubSpot.
Examples of how inbound marketing strategy is applied in SaaS
1. Marketing creates industry leaders
An inbound marketing strategy will require you to produce original content that answers your buyer's questions. This could be done through a blog, video tutorials, insightful social media posts, FAQ pages, podcasts, and other mediums that help to not only illustrate how your service helps the customer but also disseminates your insider knowledge on the challenges that you have solutions for.
When you have great content, you gain trust from your buyers because they can see the long term value of using your product, knowing that they'll always have access to relevant information and industry-leading advice.
2. Content makes a bland SaaS exciting
Tech and software don't always make for exciting reading. While people can see that there's a utility to be gained from your offer, not everyone will be an enthusiast when it comes to the nitty-gritty of understanding how a piece of software works.
Often, this is the point in the sales funnel where the customer may get frustrated and drop off; the delivery of your information has deterred their initial interest, and they've become disengaged. Or, if the more technical person in a company is responsible for presenting a use case for your SaaS to other, less technically minded stakeholders, they may not be able to communicate the key benefits effectively if you've not presented these in an appealing format.
A specialist inbound marketing agency can assess your website, social media presence, landing pages, and content with your target personas in mind. From there, they will study the kind of questions that your prospects are asking and formulate the most engaging ways of answering them.
As a result, you'll get more leads through the funnel and more satisfaction from the buyers' journey for your customers.
3. Reporting provides quantifiable results
At Klood, we're often approached by businesses that are struggling to figure out why their marketing strategies don't work. They're extracting some metrics, but they're not sure how to interpret them. Stakeholders are seeing low conversion rates without a clear indication of where things are going wrong and are concerned about the amount of budget going towards marketing and advertising activities.
Inbound marketing is inherently data-based. It relies on sophisticated CRM technologies – such as those offered by HubSpot – to continuously track and measure the effectiveness of your funnels and campaigns. Reports are generated regularly, and improvements are continually made in response to the changes in the market or consumer behaviour.
When management wants feedback on the latest campaigns, the data is always readily available. This enables flexibility, more substantial alignment with audiences and their needs, and a better representation of your business. An inbound marketing agency can demonstrate the return on investment with metrics that make sense, and that show a clear connection between their efforts and the results.
For example, Skytap, a cloud-based software company, was able to increase sales leads by 124%, online leads by 97% and organic search traffic by 55% by simply adjusting its content strategy to suit its buyer persons.
4. It builds agile businesses
We recently published a blog explaining Why Inbound Marketing Is Great for SaaS Lead Generation and highlighted the tools and strategies that helped SaaS businesses to improve their performance throughout the COVID-19 pandemic. The success of these strategies demonstrates the flexibility and opportunity that an inbound marketing agency can provide for SaaS, even when times are tough.
What is an inbound marketing agency?
An inbound marketing agency is the partner of choice for SaaS businesses, bringing a range of resources and marketing principles that work effectively within the SaaS realm.
Inbound marketing agencies can help you with the implementation stage of your new digital marketing plan and establish all the processes that go along with it. Alternatively, an agency can continue to work alongside you and assist in formulating and executing your inbound marketing campaigns.
What does an inbound marketing agency do?
By reviewing the strengths and weaknesses of your current strategy, evaluating the market and finding the opportunities and low hanging fruit that you're not currently exploiting, an inbound marketing agency will help you to boost your MMR with a view towards long term growth.
They'll achieve this by:
- Setting up structures to align your marketing team with your sales team.
- Introducing the necessary tools and platforms for marketing automation.
- Fine tuning your content marketing plan for search engine optimisation.
- Helping you generate high quality leads through inbound best practices.
As the go-to SaaS growth agency and HubSpot platinum partners, we're trusted by world-leading software companies to deliver scalable inbound marketing strategies, specifically tailored for B2B SaaS businesses. We help our clients to generate more leads that convert into sales and elevate their revenues.
To find out more about what we do or learn how our inbound marketing agency can transform your marketing efforts and boost your monthly revenue, book a growth call strategy call today. click here to book your call