Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable.

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

(How to calculate LTV and CAC)

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!

More SaaS + Software Stats

Increases in revenue growth rates drive twice as much market-capitalisation gain as margin improvements for companies with less than $4 billion in revenues

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

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

Moving from $1.5 million with an eye towards $10 million in ARR is a tough a task and will take an excellent VP of sales to get you there

While field sales remains the most popular way to sell for companies >$2.5MM revenue, companies with <$2.5MM revenue tended to use inside sales as their primary mode of distribution

80% of venture capital investments take place in the enterprise

Cloud application services (SaaS) to reach $126 billions by the end of 2021

Analysed 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

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

The very best SAAS companies keep monthly revenue churn at around 0.58%, that’s only about 7% revenue churn a year

More Growth Strategy Stats

The boom in the industry is creating more jobs for techies. Data reveals there were 627,000 unfilled positions in tech in April 2017

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

orecasts suggest that global blockchain technology revenues will experience massive growth in the coming years, with the market expected to climb to over 23.3 billion U.S. dollars in size by 2023.

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business

Revenue per employee has been steadily increasing in SAAS companies. It serves as a great longitudinal measuring stick to understand the increasing or decreasing efficiency of the business

Moving from $1.5 million with an eye towards $10 million in ARR is a tough a task and will take an excellent VP of sales to get you there

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

SAAS companies that are focused mainly on enterprise sales have higher levels of professional services

The statistic shows the worldwide IT spending on enterprise software from 2009 to 2020.

The median annual contract value (ACV) was $25K, $21K, $21K, $20K in 2016, 2015, 2014 and 2013