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.

From ForEntrepreneurs.com
Quote in SaaS & Tech Growth Strategy

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:

(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

For a SaaS business of almost any scale, the valuation impact of better retention is in the tens of millions over time

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

Customer Acquisition Cost (CAC) = sum of all sales & marketing expenses/ number of new customers added

When determining Sales Capacity, “it’s worth noting that some percentage of new sales hires won’t meet expectations, so that should be taken into consideration when setting hiring goals. Typically we have seen failure rates around 25-30% for field sales reps, but this varies by company. The failure rate is lower for inside sales reps. can be counted as half of a productive rep”

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

Even if a software company is growing at 60% annually, its chances of becoming a multibillion-dollar giant are no better than 50/50

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

Is your SaaS business viable?

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

The median Customer Acquisition Cost (CAC) for upsells is just $0.28 per $1, less than a quarter of the $1.18 spent to acquire $1 of revenue from a new customer

More SaaS & Tech Growth Strategy Stats

In 2017, IBM generated 37.8 billion U.S. dollars in global IT services revenue, making it the largest IT services company in the world in terms of net sales

SaaS, and other recurring revenue businesses are different because the revenue for the service comes over an extended period of time (the customer lifetime)

SaaS organizations are now operating in over 100 countries

Best-in-class SaaS companies achieve 5-7% annual revenue churn – equivalent to a loss of $1 out of every $200 each month

The median SaaS business loses about 10% of its revenue to churn each year and that works out to about 0.83% revenue churn a month

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

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

In 2020, China is expected to generate 55 billion U.S. dollars in the global medical technology market.

73% of organizations indicated nearly all their apps will be SaaS by 2021

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