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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.

 

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More SaaS + Software Stats

Negative Churn and Expansion Revenue

Customer’s lifetime value (LTV)= average revenue per user (ARPU) / monthly churn rate

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

Growing faster has twice as much impact on share price as improving margins

The fastest growing SaaS companies scale their organizations rapidly, growing their teams by an average of 56% each year

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

The very best SAAS companies keep monthly revenue churn at around 0.58%, that’s only about 7% revenue churn a year

The fastest growing SAAS companies averaged $250k in MRR and were only losing around 3.2% of that revenue each month to churn

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

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

More Growth Strategy Stats

For a SaaS business of almost any scale, the valuation impact of better retention is in the tens of millions over time

The fastest growing SaaS companies scale their organizations rapidly, growing their teams by an average of 56% each year

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

Is your SaaS business viable?

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

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

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

In 2018, the revenue of General Dynamics amounted to nearly 36.2 billion U.S. dollars.

How Often Should The Pricing Committee Be Meeting And Making Changes?

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