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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

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

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business; which may have a dramatically negative effect on your company’s growth. Source: Mckinsey

It’s common for startups to grow rapidly, doubling or tripling in size year over year, until they hit $5M in ARR

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

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

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

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

SaaS businesses face significant losses in the early years (and often an associated cash flow problem)

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

More than two thirds of SAAS companies experienced annual churn rates of 5% or higher

More Growth Strategy Stats

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

Increases in revenue growth rates drive twice as much market-capitalisation gain as margin improvements for companies with less than $4 billion in revenues

At Facebook, 15 percent of tech roles are staffed by women

The statistic shows the worldwide IT spending on enterprise software from 2009 to 2020.

SAAS companies with >$250K median ACV book nearly 25% of their contracts at 3 years or longer

As of December 2018, there were total 105,000 employees in Lockheed Martin, as compared to 126,000 employees in 2015.

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

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business

Revenue Renewal Rate= (MRR up for the renewal at beginning of month- MRR not renewed at the end of month)/ MRR up for renewal at beginning of month)

The median monthly revenue churn for large SaaS companies is 0.75%, translating into an annual revenue churn rate of 10%