How to Monitor Your Business in Practice? – Part 1

Online businesses are easy to monitor due to their digital nature. This is an advantage to exploit to ensure its health and detect any drifts early.

Let’s create a simple monitoring document like an Excel table.

In this first part, we will consider a paid subscription business (not Freemium) monthly (renewal paid each month) and 100% online (no offline sales).

• Which KPIs should you monitor?
• How to monitor Acquisition and Retention
• What criteria should be used to reconcile the two activities
• What are the best practices

1. The KPIs to monitor

The minimum to monitor:

• Bookings
• ASP (Average Selling Price)

For the Retention part of the business:

• The number of expiring subscriptions (opportunity)
• The number of renewed subscriptions (actual sold units)
• The retention rate

For the Acquisition part of the business:

• Web traffic (opportunity)
• The conversion rate
• The number of new subscriptions (actual sold units)
  

2. Monitoring Acquisition business

The Acquisition part of a subscription business is identical to any other online transactional business. We monitor traffic, subscriptions sold and bookings achieved by month. The conversion rate and ASP are calculated values.

Depending on the volumes, we can monitor in more detail by segmenting: by traffic source and by product, for example.

Example of a monitoring table for Acquisition:

Table #1 : Acquisition – measured values in Black, calculated value in Blue.

3. Monitoring Retention business

In the Retention part of the business, since subscription renewal is automatic, this activity does not generate web traffic. However, we can transpose the principle “Opportunity -> units -> Bookings” into “Subscription to renew -> Renewed subscriptions -> Bookings”. We obtain a very similar table:

Example of a monitoring table: 

Table #2 : Retention – measured values in Black, calculated value in Blue.

As for acquisition, segmentation by other KPIs allows for more detailed monitoring.

4. Reconciliation

It’s obvious that Acquisition and Retention bookings must be reconciled. The same goes for the number of subscribers.

Indeed, a subscription business is stable if the number of subscribers acquired compensates for the number of subscribers who leave. Therefore, it’s necessary to monitor the evolution of the total number of subscribers. The formula is as follows:

New Sub (Month #n) + Retained Sub (Month #n) = Expiring Sub (Month #n+1) 

Example of a monitoring table:

Table #3 : Consolidation – reported values in Black, calculated value in Blue, Green and Red

5. Best monitoring practices

Everyone has freedom to monitor the data according to their own way. However, there are a few essentials:

• Unexpected fluctuations: some KPIs are supposed to be stable, such as ASP, which mainly depends on price and product mix. Monitoring the variations of this type of KPI makes it possible to detect anomalies
• Growth: it’s good to monitor growth from month over month but also growth compared to the same month in previous years for seasonality reasons
• Segmentation: breaking down data according to sub-criteria (by product, by tenure, by acquisition source) gives an interesting level of detail as long as there is enough volume to not introduce excessive volatility
• Visualization: reading figures does not give the same impression as reading a curve. It’s interesting to have the 2 views with appropriate scales for the graphs
• Projection: the monitoring document contains the performance history. It’s easy to calculate trends and make projections over several months. It’s a practical way to converge monitoring and forecasting

In the second part of this article, we’ll discuss the case of annual and paid subscriptions.