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

Statistic Info

Monthly vs. Annual Churn Rates

Now, just so we’re on the same page, 5% – 7% Annual churn – the good churn rate – translates to 0.42 – 0.58% monthly churn.

This means companies with acceptable churn only lose about 1 out of every 200 customers (or dollars) per month.

Now that’s a solid platform you can really build a high-growth company on.

On the flip side, a high churn rate is the reason you ended 2012 with a whole bunch of new customers… but had about the same amount of revenue.

Churn is the reason that – though you acquired a lot of new logos in 2012 – you had no significant year over year growth from 2011.

More SaaS + Software Stats

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

Negative Churn and Expansion Revenue

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

Companies that spend more on sales and marketing (as a % of revenue) generally grew at a faster rate than those that spent less

High-growth companies are 8X more likely to reach $1 billion in revenues than those growing less than 20%.

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

The median TTM revenue growth rate + adj. EBITDA margin for publicly traded SaaS companies was ~37%, implying that just under one half met or exceed “The Rule of 40%”

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

56% treat “Existing Customer Renewals” as high priority

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

More Growth Strategy Stats

Median annual gross dollar churn was 8%, 7%, 6% and 8% in 2016, 2015, 2014 and 2013

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

It’s 9x cheaper to retain existing customers than acquire new customers: costing $0.13 to acquire any additional dollar of revenue

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

in 2016, women-led companies received $1.46 billion in investments from venture capitalists. Male-led companies, on the other hand, received $58.2 billion

Companies that spend more on sales and marketing (as a % of revenue) generally grew at a faster rate than those that spent less

Revenue Churn Rate = (RCR) (MRR at beginning of month – MRR at end of month) – MRR in upgrades during month / MRR at beginning of month

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

Negative Churn and Expansion Revenue

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.