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SaaS ARPU: Calculating and Optimizing

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The real secret sauce to understanding your customer is being able to understand your Average Revenue Per User (ARPU). This metric allows you to identify trends and implement change that can shift the trajectory of your business towards that large pool of SaaS profits we all dream of.

Here we walk through exactly how to calculate ARPU (Average Revenue Per User) including what to and not to include in the calculation, as well as how to optimize this crucial SaaS metric.

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SaaS ARPU: Calculating and Optimizing

  1. 1. ARPU: Calculating and Optimizing Price Intelligently’s SaaS Metric Mondays ARPU – Average Revenue Per User
  2. 2. Let’s talk about ARPU A “vanity metric” that actually matters ARPU – Average Revenue Per User
  3. 3. ARPU = Average Revenue Per User ARPU – Average Revenue Per User
  4. 4. ARPU= The average amount of monthly revenue that you receive per user. It can be the base for accelerating your Monthly Recurring Revenue growth through higher paying customers. It is also a source of fuel for your customer Lifetime Value (LTV) goals. Want To See What Your ARPU Metric Are Right Now? Get your free ProfitWell account – 1-click SaaS Metrics >> ARPU – Average Revenue Per User
  5. 5. Here’s How You Visualizes ARPU (ProfitWell Dashboard) ARPU – Average Revenue Per User
  6. 6. All that stuff is great but…why should you care? ARPU – Average Revenue Per User
  7. 7. “ARPU – the one “vanity metric” that actually matters when done right” ARPU – Average Revenue Per User
  8. 8. More specifically… Understanding your Bookings can help: Finance See the health of the business. It allows you to see what kind of business you need to be from a pricing and value perspective. See the breakdown of your ARPU with ProfitWell >> Product Validate and determine whether the value of the product is being aligned to the right customer S&M Constantly challenge and develop the value propositions and targeting to get better quarter over quarter. ARPU – Average Revenue Per User
  9. 9. Lets dive deeper and calculate ARPU like a #SaaS superstar ARPU – Average Revenue Per User
  10. 10. What items are included in calculating ARPU? ARPU Criteria Breakdown Include Exclude Monthly Recurring Revenue Free Users Account Upgrades Account Downgrades Inactive UsersLost MRR from churned customers Total Paying Customers ARPU – Average Revenue Per User
  11. 11. The calculation breakdown EQUATION Take the SUM of all your active customer MRR and divide that by the total number of customers. Keep in mind that this calculation is done in a monthly time frame. ARPU – Average Revenue Per User Total MRR Total Customers
  12. 12. Once you master calculating ARPU, Optimize It! ARPU – Average Revenue Per User
  13. 13. Increase the number of Bookings in your SaaS business by: 1. Add-Ons, Value Metrics, and Upgrades 2. Ensure your retention is on point, especially for larger customers 3. Make sure you’re targeting the right customer personas $ $ $ $ $ $ $ $ $ $ $ $ ARPU – Average Revenue Per User
  14. 14. Any way you can absolutely increase the amount of revenue from your customers month over month should be considered. The easiest way to do this is to make sure that a value metric is central to your pricing strategy to bake in expansionary revenue Key Optimization Add-Ons, Value Metrics, and Upgrades ARPU – Average Revenue Per User
  15. 15. MRR churn is directly connected to your ARPU, as leaking customers (especially large ones) will reduce your customers and your revenue. Make sure you’re running a proper retention process Key Optimization Ensure your retention is on point especially for larger customers ARPU – Average Revenue Per User
  16. 16. You may be deflating your ARPU by targeting too many small, distracting low revenue customers. Make sure your quantify your buyer personas properly and target the right ones for growth Key Optimization Make sure you’re targeting the right customer personas ARPU – Average Revenue Per User
  17. 17. Boom. Now you can maximize the health of your SaaS business with your new mastery of ARPU. ARPU – Average Revenue Per User
  18. 18. Want real time SaaS Metrics? Know and understand your SaaS Metrics with ProfitWell for free – the most accurate metrics on the market Click here to get your free ProfitWell account >> ARPU – Average Revenue Per User

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