How To Track Recurring Revenue (ARR & MRR) With Salesforce?
Running a SaaS business and managing your revenue operations on Salesforce? Looking for clarity around popular recurring revenue metrics? In this blog post, we provide an overview of key SaaS metrics and provide practical examples of how to track recurring revenue with Salesforce and Dear Lucy.
Being able to track your company’s growth is key to success. Most companies have both recurring revenue streams and “non-recurring” revenue streams and it is vital to make a distinction between the two.
In the case of a typical SaaS company, a contract with the customer includes
recurring software license fees (i.e. subscription revenues) and
implementation fees (i.e. one-time service revenues).
Those in charge of the company's growth and revenue operations need the ability to monitor, visualize and report both of these revenue streams.
In this post, we focus on recurring revenues and how to monitor those with Salesforce and Dear Lucy. Read on to learn how to do it and to see examples of key metrics.
Why Track Recurring Revenue in Salesforce?
Investopedia defines recurring revenue as:
“…the portion of a company's revenue that is expected to continue in the future. Unlike one-off sales, these revenues are predictable, stable and can be counted on to occur at regular intervals going forward with a relatively high degree of certainty.”
Key metrics for recurring revenue are Annual Recurring Revenue (ARR) and Monthly Recurring Revenue (MRR). Having the ability to monitor and forecast these revenue metrics is at the heart of all subscription and SaaS businesses.
More often than not, teams use spreadsheets and business intelligence (BI) tools to combine and analyze data from CRM systems and financial systems to calculate recurring revenue ratios and KPIs.
Keeping track of recurring revenue with Salesforce and Dear Lucy is typically a more immediate indicator of growth compared to tracking recurring revenues from financial systems alone as financial transactions typically take place sometime after the contracts with the customers have already been signed.
Quickly growing SaaS scale-ups looking for outside funding to boost growth need robust reporting capabilities to satisfy the needs of investors. Many investors urge companies to put in place user-friendly, real-time reporting systems early enough in their growth journey. Real-time, visual reporting solutions keep the company focused and satisfy the data needs of various stakeholders.
Recurring revenue is also a crucial element in growth company valuations, so being able to track that in a reliable way is vital. Many companies also track their annual recurring revenue per employee in order to compare success against other SaaS companies.
How to Track Recurring Revenue with Salesforce?
Calculating recurring revenue is basically quite simple but achieving it in practice may not be so straightforward and can require some serious number crunching. With Dear Lucy the process is easy: Dear Lucy pulls deal data from Salesforce, calculates key revenue metrics and revenue forecasts, and visualizes it all in a simple and user-friendly way.
As with anything else, the work starts with your CRM data quality. To keep track of recurring revenue metrics, you need to have the following data for all your deals in Salesforce:
Contract start date
Contract end date
Recurring revenue value (€/$ or any other currency you are using)
Once these are in place, the metrics explained below, can be calculated. With Dear Lucy, you can use whichever Salesforce plan you currently have and add the required custom fields to Salesforce to collect the required data.
Typical Recurring Revenue Metrics
To get an overview of the key recurring revenue metrics for Salesforce, you can read on or jump over to our live product demo to explore the metrics yourself.
Here is a brief overview of the key recurring revenue metrics and illustrations:
1 MONTHLY OVERVIEW: TOTAL MRR DEVELOPMENT
This is the most basic metric - an overview that illustrates the existing MRR base, new MRR gained this month, and any possible lost MRR (i.e. churn). The chart includes data for last year and a target for this year.
2 MRR / ARR GROWTH
In addition to the absolute revenue figures, you also want to understand recurring revenue growth compared to the previous period. This chart shows a monthly overview of the recurring revenue growth rate - either MRR or ARR, depending on your choice. The chart includes data for this year and calculates the growth % (compared to the same period last year).
A high ARR growth rate is what all growth companies in a subscription business aim for but on its own, it can be deceiving. As FastCompany rightly writes “high ARR growth can indicate that a SaaS company is merely filling the bucket faster than it’s leaking”.
Hence, we need to introduce churn.
3 CHURN RATE%
Investopedia defines churn rate
“…as the percentage of service subscribers who discontinue their subscriptions within a given time period.”
In Dear Lucy, the churn rate % can be calculated either by
value of deals or
number of deals
Clicking on the overview opens a table view that provides month-to-month MRR figures and the churn rate for each month.
4 RECURRING REVENUE FORECAST
Dear Lucy calculates a forecast for the upcoming quarters or months. The forecast can be based on total contract values (that includes both recurring and non-recurring revenue items) or recurring revenues only.
5 GAINED MRR THIS MONTH, LOST MRR THIS MONTH
Overview tiles that display the key MRR values for this month, the previous month, and a possible target if you have included that in Dear Lucy.
Clicking on the overviews of Gained MRR and Lost MRR reveals a table view that shows the actual won and lost deals as a sortable list.
Embed Recurring Revenue Dashboards into Salesforce
Ease-of-use is one of the key components of good enterprise software. Dear Lucy allows the embedding of recurring revenue dashboards into Salesforce, so you can provide your team with easy access to key recurring revenue metrics right inside Salesforce.
To embed Dear Lucy sales and revenue dashboards into Salesforce, simply follow the steps below.
In Dear Lucy:
Create your desired dashboard in Dear Lucy with the recurring revenue and churn metrics that you would like to display in Salesforce.
Remember to adjust the look and feel to match your company brand and colors
Add targets to key metrics in Dear Lucy to visualize and track progress against goals.
Create a kiosk link in Dear Lucy for the dashboard(s) you would like to add to Salesforce
Allow the embedding of the dashboards in Dear Lucy “Settings.”
Copy the kiosk link URL in Dear Lucy
Convert the kiosk link into an iFrame URL. Dear Lucy does not provide this but it can easily be created using free online tools or ask your IT to help out.
In Salesforce:
Use Quick find and search for “Visualforce pages” > Add new > Add label and name.
Edit Visualforce Markup > Add the iFrame URL
Under the Visualforce Page, make sure you tick the mark to make it “Available for Lightning Experience, Experience Builder sites…”
Go to Lightning App Builder > New > Homepage (recommended One Region)
Select the content to the page from Visualforce > Select the page that you have created.
Your team now has instant access to up-to-date info on key recurring revenue metrics at all times!
True Recurring Revenue Insights With Targets and Context
Tracking key business metrics is important but they only start to make sense when you know what you are aiming for and what the context of each number is. If you don’t know what you are trying to achieve or why the numbers are what they are, numbers are just data that rarely provide true insights.
To help you easily know what to aim for, Dear Lucy has a so-called “goal engine” that allows you to set a target for any sales and revenue metrics. Not just quota but all the leading indicators as well. With Dear Lucy, you can set targets for e.g.
New MRR per month, quarter, or year
MRR or ARR growth % (year-over-year or month-over-month)
Churn %
The targets can be set for the entire company or a business unit or broken down per sales pipeline, per product, or even sales rep. If your business fluctuates seasonally, you can also define different targets for each quarter, month, or even week.
Once the targets have been set in Dear Lucy, Dear Lucy compares actual performance (pulled hourly from Salesforce) against the targets and displays the results on the dashboards. Red and green indicators show you instantly where you are and you can define whether the deviation is displayed as an absolute number or a percentage.
In addition to targets, Dear Lucy provides an easy way to provide context to the numbers. Firstly, all metrics include an info button that allows you to input the exact definition for the metrics. In addition, “text widgets” allow you to add commentary to the dashboards to provide more context to the performance.
Easy-to-use Recurring Revenue Dashboards for Salesforce
Dear Lucy sales and revenue dashboards for Salesforce allow you to stay on top of key sales and revenue metrics. Here are some practical ways in which our customers make use of Dear Lucy dashboards with Salesforce.
Dear Lucy dashboards are used to facilitate:
Weekly and monthly sales team meetings
Recurring business area/business unit meetings
Top management and C-level meetings
Board and investor meetings
Monthly and Quarterly Business Reviews
Performance review meetings between sales managers and sales reps
Dear Lucy dashboards are visual, responsive, and intuitive so you can
use live, up-to-date sales and revenue dashboards during meetings
invite employees to access Dear Lucy dashboards so they can find the key sales and revenue metrics whenever they need
access sales and revenue dashboards on mobile devices
display the key sales and recurring revenue KPIs on info screens at the office to provide visibility for all
embed Dear Lucy dashboards on internal websites or collaboration tools that allow embedding of external content
Interested?
Dear Lucy offers a wide range of sales and revenue metrics and forecasting tools for Salesforce. You can select your favorite KPIs and charts from the library of 300+ ready-made metrics, bring in custom fields from Salesforce or have our team build metrics just for you.
Book a session with our expert to learn more!