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.

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!

SaaS & Tech Growth Strategy Articles

• Maximizing Revenue with Effective SaaS Sales Strategies
  Maximizing Revenue with Effective SaaS Sales StrategiesSaaS sales strategies have evolved significantly over the past few years, with the industry seeing a compound annual growth rate (CAGR) of 18% from 2020 to 2027, according to a report by Allied Market Research. This growth has resulted in a highly competitive market, where differentiation and customer retention […]
• 13 Strategies to Boost SaaS User Retention and Renewals
  Improving your retention rate can mean the difference between growing your company and running it into the ground. Read specific strategies you can use to improve your SaaS retention rate.
• Evaluating Your Software Brand Positioning Through SWOT Analysis
  It's Strategic Planning month here at Insivia, so we're continuing our conversation about planning for next year.
• Small Ways to Add Big Personality to Your IT Site
  No one said your website needed to be boring.
• Take AIM: How to Target the Right Audience
  Steps needed to establish and reach your target audience.
• The Vision Gap
• How to Determine a SaaS Marketing Budget
  Determining a marketing budget for a SaaS or Software company can be a challenging exercise.  Often there is no one right answer for everyone but there are ways to help you attack the problem.Below, read our expanded article and watch our video with Andy Halko as he shares some helpful tips on how to create […]
• How to Determine a Test Pricing Strategy for Your SaaS Product
  SaaS pricing changes as a company grows and matures. Research states that 98% of SaaS businesses have shown positive results as an outcome of changing core aspects of their pricing policies.2022 is the year for your business to revisit your pricing. Due to a growing market, difficult competition, and the fast-paced industry, many SaaS companies […]
• Marketing Strategy vs. Marketing Plan
  So you’ve tried every marketing tip in the book, and you still aren’t seeing results. You’ve started a blog, engaged on social media, made videos, and done everything else you’ve been recommended. Despite your extensive efforts, you haven’t seen any increase in your business. So what’s the problem? The problem probably isn’t what you’re doing, […]

SaaS + Software Stats

• All types of investment have grown, year-on-year, with the biggest growth during the seed stage of financing
• 56% treat “Existing Customer Renewals” as high priority
• The median startup spends 92% of first year revenue on customer acquisition, taking 11-months to payback their Customer Acquisition Cost
• The median annual unit churn for SAAS companies was 10% in 2016
• SaaS solutions have the highest security features with 95% security failures due to human error
• Gross dollar churn among companies with an internet go-to-market strategy saw a meaningful increase, up from 8% in 2015
• The average company booking professional services revenue on new deals is equivalent to 16% of the first year subscription value. Professional services margins are approximately 22%
• The very best SaaS businesses have a negative revenue churn rate and will have a Revenue Retention Rate of greater than 100%
• SAAS companies invest between 80% and 120% of their revenue in sales and marketing in the first 5 years of their existence

SaaS & Tech Growth Strategy Stats

• To establish a revenue or lead-commitment based on your funnel metrics and revenue-growth goals, work backward from the gross revenue amount that marketing is responsible for generating (generally around 40%)
• They may forget what you said, but they will never forget how you made them feel.
• The 2015 median revenue growth rate was 44%, while the median projected growth rate for 2016 is 48%
• The metrics that matter for each sales funnel, vary from one company to the next depending on the steps involved in the funnel
• 26% of SAAS companies with at least $15MM in 2015 GAAP revenue had a revenue growth rate + EBITDA margin of 40% or higher.
• The fastest growing SaaS companies scale their organizations rapidly, growing their teams by an average of 56% each year
• 86% of SaaS businesses treat “New Customer Acquisition” as their highest growth priority, both in terms of executive support and funding available
• Even if a software company is growing at 60% annually, its chances of becoming a multibillion-dollar giant are no better than 50/50
• All types of investment have grown, year-on-year, with the biggest growth during the seed stage of financing