Quote Info

This is because they have to invest heavily upfront to acquire the customer, but recover the profits from that investment over a long period of time. The faster the business decides to grow, the worse the losses become. Many investors/board members have a problem understanding this, and want to hit the brakes at precisely the moment when they should be hitting the accelerator.

In many SaaS businesses, this also translates into a cash flow problem, as they may only be able to get the customer to pay them month by month.

For Entrepreneurs.com

More SaaS + Software Stats

26% of SAAS companies with at least $15MM in 2015 GAAP revenue had a revenue growth rate + EBITDA margin of 40% or higher

The fastest growing SaaS companies scale their organizations rapidly, growing their teams by an average of 56% each year

The average SaaS business generates 16% of its new Annual Contract Value (ACV) from upselling to existing customers

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business; this will become a major drag on growth

It’s 4x cheaper to upsell existing customers than acquire new customers: costing just $0.28 to acquire an additional dollar of revenue

Unlike many other industries, if a software company grows at only 20%, it has a 92% chance of ceasing to exist within a few years

The average company booking professional services revenue on new deals is equivalent to 16% of the first year subscription value. Professional services margins are approximately 22%

SAAS companies need to track the number of visitors, trials and closed deals; And also track the conversion rates, with the goal of improving those over time

Net-revenue churn improves with larger Average Contract Value (ACV), likely due to more structural churn among SMB customers and higher switching costs associated with larger contracts

Growing faster has twice as much impact on share price as improving margins

More Growth Strategy Stats

The best SAAS businesses have a LTV to CAC ratio that is higher than 3, sometimes as high as 7 or 8

Internet sales-driven companies have a much greater reliance on marketing, with 65% of the median company’s CAC budget devoted to marketing

It’s 9x cheaper to retain existing customers than acquire new customers: costing $0.13 to acquire any additional dollar of revenue

51% of large (revenue >$2.5million) SaaS companies use field sales as their primary method of distribution

The average SaaS company spends just 6 hours determining their pricing strategy

More than two thirds of SAAS companies experienced annual churn rates of 5% or higher

The median annual unit churn for SAAS companies was 10% in 2016

Revenue Renewal Rate= (MRR up for the renewal at beginning of month- MRR not renewed at the end of month)/ MRR up for renewal at beginning of month)

The average company booking professional services revenue on new deals is equivalent to 16% of the first year subscription value. Professional services margins are approximately 22%

The very best SaaS businesses have a negative revenue churn rate and will have a Revenue Retention Rate of greater than 100%