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

Japanese company Hitachi accounted for three percent of the world’s market for diagnostic imaging in 2017.

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

How to Reduce Churn

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

The median annual unit churn for SAAS companies was 10% in 2016

The median startup spends 92% of first year revenue on customer acquisition, taking 11-months to payback their Customer Acquisition Cost

51% of large (revenue >$2.5million) SaaS companies use field sales as their primary method of distribution

SaaS companies in the $7.5MM-$15MM range are among the fastest growers

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

Companies with longer contracts (2+ years) reported the lowest annual unit churn

More Growth Strategy Stats

How to Reduce Churn

Companies with longer contracts (2+ years) reported the lowest annual unit churn

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

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

26% of SAAS companies with at least $15MM in 2015 GAAP revenue had a revenue growth rate + EBITDA margin of 40% or higher

56% treat “Existing Customer Renewals” as high priority

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%)

80% of venture capital investments take place in the enterprise

Software and online services are in a period of dizzying growth

The median average contract length is 1.3 years and the average billing term is seven months in advance in 2016. Comparable to 2015, with average contract length shortening from 1.5 to 1.3 years and average billing period increasing by one month from 2015 to 7 months