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

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David Skok has noted that there is a problem with using this formula, as you may have several expensive people in the team that should scale to handle a larger number of customers as you grow. In this case, your CAC will be too high. David suggested making a very simple adjustment to the Sales & Marketing expenses to take only a portion of those salaries and expenses in the early days. This will provide a better indication of how CAC will look in the future when you are at scale.

More SaaS + Software Stats

The average company gets 16% of new ACV sales from up-sells and expansions, though companies with revenue between $10MM-$40MM are relying more heavily on up-sell and expansions

To generate a single dollar of new customer revenue, Field Sales strategies have an average Customer Acquisition Cost (CAC) of $1.14

86% of SaaS businesses treat “New Customer Acquisition” as their highest growth priority, both in terms of executive support and funding available

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business; this will become a major drag on growth

Since churn is so important, wouldn’t it be useful if we could predict in advance which customers were most likely to churn?

Is your SaaS business viable?

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

In all SaaS businesses there will likely come a moment where they realize that not all customers are created equal

Net-revenue churn improves with larger Average Contract Value (ACV), likely due to more structural churn among SMB customers and higher switching costs associated with larger contracts

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

More Growth Strategy Stats

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

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

The average Quick Ratio of fastest growing SaaS companies (those with a CAGR of over 50%) is 3.9: generating $3.9 in revenue for every $1 lost to revenue churn

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

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

Internet Sales strategies have a significantly lower CAC of just $0.42

Account Churn Rate (ACR) = customers at beginning of month – customers at the end of month / customers at beginning of month

Analysed 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

A 2017 SaaS Capital survey showed that young companies actually have higher retention rates than more mature SaaS businesses

Negative Churn and Expansion Revenue