The role of the CFO has been evolving. As businesses move away from traditional models and adopt subscription-based models, CFOs need to be savvy about which subscription metrics to track and analyze to keep a pulse on the health of their businesses. Keeping this in mind, we will take a look at three subscription metrics every CFO should watch in order to measure business performance.
- The first subscription metric CFOs should pay attention to is the net retention rate. This metric measures the amount of recurring revenue gained from a cohort of customers over time. Companies with higher net retention rates grow faster than those with lower net retention rates. It is important to monitor this metric in order to determine if the subscription business is growing or stagnating.
- The second subscription metric CFOs should track is the recurring-to-consumption billing ratio. Companies that use a combination of recurring and usage-based pricing tend to grow faster than those that don’t. By monitoring this metric, CFOs can identify areas where usage-based pricing can be utilized to increase the company’s growth rate.
- The third subscription metric CFOs should watch is net annual recurring revenue changes. This metric tracks the changes in recurring revenue across various categories, such as new, contraction, expansion, and churn. By monitoring these changes, CFOs can get a better understanding of the transactions driving growth in their businesses.
These are just three of the many subscription metrics CFOs should track and analyze. Tracking these metrics allows CFOs to make more informed decisions and more accurately measure the performance of their businesses. This is especially important in today’s competitive marketplace, where CFOs are tasked with managing increasingly complex, dynamic, and customer-centric back offices.
In conclusion, CFOs need to be savvy about which subscription metrics to track and analyze in order to measure business performance. The three metrics discussed in this blog are net retention rate, recurring-to-consumption billing ratio, and net annual recurring revenue changes. By monitoring these metrics, CFOs can make more informed decisions and more accurately measure the performance of their businesses.
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