Video Discription |
In this episode of SaaS Metrics School, I tackle a frequently asked question that recently came in via my blog: Should you be tracking and forecasting revenue on a daily basis? The short answer is that it depends on the nature of your SaaS business, but let’s dive into the details.
Understanding Revenue Tracking in SaaS
For most SaaS businesses, especially those targeting mid-market or enterprise customers with larger price points, tracking revenue on a daily basis may not be necessary. Why? Simply because the data doesn't move fast enough. In businesses where you might sign one or five large customers a month, daily tracking isn't going to provide valuable insights. Instead, your revenue movements are more likely to be significant but infrequent, making daily tracking less practical.
However, if you operate a low-price point, high-volume, self-service SaaS business with thousands of users, the scenario changes. In this case, tracking revenue on a daily basis can be crucial, particularly when your business relies heavily on paid advertising. As these businesses often adjust their ads on a daily or weekly basis, aligning revenue tracking with advertising spend becomes essential to monitor how well you're doing with your Customer Acquisition Cost (CAC) and Lifetime Value to CAC (LTV to CAC) ratio.
Revenue Tracking vs. Forecasting: What's the Difference?
Another key distinction to make is between tracking actual revenue and forecasting revenue on a daily basis. Tracking revenue simply means monitoring the income as it comes in daily, which is relatively straightforward in a high-volume business. Forecasting, on the other hand, requires a lot more data and accuracy.
To forecast revenue accurately on a daily basis, you'd need a substantial amount of historical data. If you have that data and can achieve a reasonable level of accuracy, then daily forecasting might be a valuable exercise. This approach could allow you to link your revenue forecasts to expected paid ad spend and other key metrics like LTV to CAC. However, if your forecasts lack accuracy, daily forecasting may end up being more of a distraction than a useful tool.
When Is Daily Revenue Tracking Necessary?
Daily revenue tracking is generally not necessary for most SaaS businesses, especially those targeting higher ACV customers. In these cases, financial metrics tend to move slower, and monthly tracking is often sufficient. However, there are always exceptions. For example, if you're running a business that lives and dies by LTV to CAC, especially with significant investment in paid advertising, then daily tracking may be critical.
It's also important to remember that while financial metrics may not need daily tracking, other metrics like pipeline data, leads data, and opportunity data coming out of your CRM system should be tracked more frequently, possibly even on a weekly basis.
Conclusion
In summary, whether you should track and forecast revenue on a daily basis depends largely on your business model. For high-volume, low-price point SaaS businesses, especially those heavily reliant on paid advertising, daily tracking and forecasting can provide valuable insights and help optimize your strategies. However, for mid-market and enterprise-focused SaaS companies, monthly tracking might be more appropriate, as daily data fluctuations are less relevant.
Thanks for tuning in to this episode of SaaS Metrics School. Don't forget to leave your questions in the comments or reach out via my blog. If you found this video helpful, make sure to like, subscribe, and hit the notification bell so you never miss an episode. Stay tuned for more insights into mastering SaaS metrics!
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