The data generated by a subscription business is highly valuable in understanding your customers, assessing the health of your business, and helping you with your financial planning.
Here are the main Key Performance Indicators (KPI) to monitor:
1. (Monthly, Quarterly) Run Rate
The run rate is the amount of revenues collected over a past period (for example last month) extrapolated over a longer period of time. Monitoring your monthly run rate (MRR) over a quarter can help you assess recent performance and is an early indicator of fundamental changes in your subscribers base. For example, a drop of MRR over a couple of months may indicate an increase in cancellations. Inversely, an increase of MRR with a constant number of subscribers can be symptomatic of an uptick in upgrades.
The run rate can be a double edged sword though, as it is especially volatile for seasonal businesses.
2. Size of the subscribers base
The number of subscribers is a very simple, yet powerful metric to monitor. By further breaking it by subscription types (e.g. Gold, Silver, Bronze), one can check the relative performance of various offerings. If the distribution is highly skewed towards the lower-end tiers, the sales team could focus on selling upgrades, in order to increase the overall run rate, without incurring any customer acquisition cost.
Churn, or attrition, can be formally defined as the number of cancellations in a month divided by the average number of active subscribers on that month. It is an indirect measure of cancellations and can indicate an increase in the number of dissatisfied customers and/or the arrival of new direct competitors.
4. Overdue accounts
An account is considered overdue if it has an outstanding, unpaid, balance for an extended period of time. An increase in overdue numbers could indicate a technical issue (difficulty to get payment through your gateway, large portion of spammers using fake or stolen credit cards, etc.) or a deeper issue with the product (lack of engagement, customer forgot the subscription and have old credit cards on file, …).
This number is probably the more complicated one to analyze and often requires examining individual accounts to understand the root cause.
Having worked on Analytics at Ning over the past three years, monitoring these four numbers not only helped me monitor the health of our business, but it was also tremendously helpful in understanding our customer base, just by the number of (product, financial, …) questions they triggered.
What are the numbers you monitor?