Quote Info

A great way to understand any business model is to answer the following simple question:

Can I make more profit from my customers than it costs me to acquire them?

This is effectively a study of the unit economics of each customer. To answer the question, we need two metrics:

  • LTV – the Lifetime Value of a typical customer
  • CAC – the Cost to Acquire a  typical Customer

(For more on how to calculate LTV and CAC, click here.)

Entrepreneurs are usually overoptimistic about how much it costs to acquire a customer. This probably comes from a belief that customers will be so excited about what they have built, that they will beat a path to their doors to buy the product. The reality is often very different!

For Entrepreneurs.com

More SaaS + Software Stats

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

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

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

Internet Sales strategies have a significantly lower CAC of just $0.42

56% treat “Existing Customer Renewals” as high priority

SaaS businesses face significant losses in the early years (and often an associated cash flow problem)

SaaS companies in the $7.5MM-$15MM range are among the fastest growers

High-growth companies generate 60% fewer sales opportunities than low-growth companies

At a 35% CAGR, it takes 10 years for a SaaS company to grow from $5M to $100M in ARR

Gross dollar churn among companies with an internet go-to-market strategy saw a meaningful increase, up from 8% in 2015

More Growth Strategy Stats

The median cost for a SaaS company to acquire a dollar of new customer revenue is $1.18

Growth rate accelerates in the expansion stage ($2.5M – $10M ARR)

The median average contract length is 1.3 years and the average billing term is seven months in advance in 2016. Comparable to 2015, with average contract length shortening from 1.5 to 1.3 years and average billing period increasing by one month from 2015 to 7 months

47% of millennials want to work at diverse companies, according to a recent study.

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts. Source: ForEntrepreneurs

A 2017 SaaS Capital survey showed that young companies actually have higher retention rates than more mature SaaS businesses

In 2018, the market size of information technology outsourcing amounted to 62 billion U.S. dollars.

Analyzed by contract value, field sales are primarily evident for companies with median deals over $25K. Inside sales strategies are most popular for companies with $1K-$25K median deal sizes

In all SaaS businesses there will likely come a moment where they realize that not all customers are created equal

The very best SAAS business has a negative churn rate and will have a Dollar Retention Rate of greater than 100%