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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

55% of SaaS companies rate Customer Retention as the key metric to measure

SaaS solutions have the highest security features with 95% security failures due to human error

SaaS organizations are now operating in over 100 countries

More than 1/2 of SAAS companies increased their spending on customer retention last year

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

SAAS companies invest between 80% and 120% of their revenue in sales and marketing in the first 5 years of their existence

54% treat upselling and add-on sales as high priority

The metrics that matter for each sales funnel, vary from one company to the next depending on the steps involved in the funnel

Negative Churn and Expansion Revenue

After $10M in ARR, the median growth rate slows to just under 50%

More Growth Strategy Stats

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

SaaS IPOs have more than doubled over the last 12 years

In 2017, Foxconn Technology Group achieved a net income of 135.37 billion New Taiwanese dollars, the equivalent to approximately 4.55 billion U.S. dollars.

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

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

How To Make Pricing A Constant Process In Your Organization

A University of Texas study showed that women ask for $7,000 less than their male counterparts in job interviews

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

54% treat upselling and add-on sales as high priority

Invention is 10% inspiration and 90% perspiration.