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

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

Three uses for the SaaS Guidelines

If you are charging $500 per month, you can afford to spend up to 12x that amount (i.e. $6,000) on acquiring a new customer

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

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

Publicly-traded SaaS companies have an average Revenue Per Employee of $200,000

Between the SMB and Enterprise customer types, the top-quartile performers not only have net-revenue churn that is 14% to 23% percentage less than the average performers but also have net-revenue churn that is negative in an absolute sense

80% of venture capital investments take place in the enterprise

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

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

More Growth Strategy Stats

As with unit churn, companies with longer contracts (2+ years) tend to report lower annual dollar churn

General Dynamics is a market leader in the aerospace and defense industry. In 2018, a total of 105,600 people were working at General Dynamics.

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

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

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

Customer’s lifetime value (LTV)= average revenue per user (ARPU) / monthly churn rate

In 2019, spending on IT services is expected to amount to 1,016 billion U.S. dollars worldwide

The fastest growing SaaS companies raise an average of $9.5M in Series A funding

High-growth companies offer a return to shareholders 5 times greater than medium-growth companies

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