6. Evaluating Growth Trends

 
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Overview

The success of a SaaS company can be considered in terms of customer numbers or revenue. We’ll create charts tracking changes in both of these metrics in this lesson.

Summary

Analyzing Growth from the Revenue Perspective

  • The increased MRR from New Customers accounts for the vast majority of the MRR changes over the course of the dataset
  • New customers and churning customers represent a larger monetary amount than expansion and contraction
  • This makes sense as all the revenue of a new or churning customer is gained or lost to the company
  • Expanding and contracting customers have a smaller, incremental effect on MRR

Analyzing Growth from the Customer Perspective

  • The bar for new customers is still the largest bar by a considerable margin, although the other bars are larger than on the revenue chart
  • Clearly, the company is gaining subscribers at a significantly higher rate than they are churning

Transcript

In this lesson, we'll continue looking at trends in MRR over the course of 2016 and 2017.

Our goal is to create combo charts analyzing growth trends from both the customer perspective and the revenue perspective.

This will allow us to combine all the MRR categories on a single chart.

Let's start by creating a combo chart looking at MRR changes from the revenue perspective.

We'll create a line and stacked combo chart and position it on the left half of the canvas, leaving room at the top for slicers.

We'll then add the transaction date field to the chart followed by the MRR change field.

As we've done previously, we'll expand the chart down to the monthly level by selecting the branched arrows twice.

Next, we'll add MRR category to the column series well.

Now, each column shows us the breakdown of new, expansion, and contraction MRR as well as churn.

As you can see, the bar for new MRR is significantly larger than the expansion, contraction and churn bars.

This confirms that the growth in MRR has been driven by new customers.

Because the columns incorporate positive and negative values, it's not easy to determine the total increase in MRR for each month.

Therefore, we'll drag MRR change to the line values well to produce a line of total change in MRR for each month.

We now have a fairly detailed insight into the growth of MRR.

However, we would also like to analyze changes in MRR from the customer perspective. We'll create a copy of our combo chart, paste it, and move it to the right half of the canvas.

We'll then remove MRR change from the column values well, and replace it with customer ID from the transactions table.

This chart shows us the number of customers in each MRR category in each month.

The no change category is, by far, the largest, but it's not that interesting, so we'll filter it out.

We'll scroll down to the filters area and filter the MRR category field.

We'll select All, then unselect No Change.

We're now only counting customers whose subscription has changed in any specific month.

As we can see, the appearance of this chart is different from the previous one. Although new customers are still the largest group, the gap between them and the other groups is not as large.

The logic of this is fairly intuitive.

All the MRR that a new customer brings in is additional revenue to the company. By contrast, a customer who expands is already generating MRR, so their expansion brings about a smaller increase in MRR.

This explains why new customers represent such a large share of the increase in MRR that is visible in the chart on the left.

While it's obviously good news that the company is generating so much new revenue, we should also look at existing customers in more detail.

Software as a service businesses such InterSlice find it easier to retain customers in the long run, so it's important not to get caught up in the current tread of expansion.

Let's add a slicer to the canvas, position it above our charts, and drag in the MRR category field.

We'll then go to the format section of the visualizations pane, choose Selection Controls, and turn Single Selection off.

This allows us to select multiple values.

We'll then select expansion, contraction, and churn as these are the three changes that can affect existing customers.

If we focus on the revenue chart on the left, we can see that churn and contraction costs the company revenue while expansion provides a revenue gain.

The line representing the overall MRR change is below zero, indicating that the overall revenue trend for expansion, contraction and churn is generally negative.

Without new customers, the company's MRR would be declining.

However, if we use the same logic as before, a churned customer represents a bigger revenue change than a customer who expands or contracts. So this conclusion is not necessarily a big problem.

If we unselect Churn and focus only on expansions and contractions, we can see that the MRR gain from expansions is greater than the MRR loss from contractions for all but one month in the data set.

All in all, we can conclude that the company is performing reasonably well among existing customers, but the overall MRR trends are very much driven by new customers.

As we can see, analyzing MRR changes from a revenue perspective and a customer perspective can deliver distinctly different results.

In the next lesson, we'll use a waterfall chart to perform our final MRR analysis.

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