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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

If a software company grows at 20% annually, it has a 92% chance of ceasing to exist within a few years

Our experiences with SaaS startups indicate that they usually start with a couple of lead generation programs such as Pay Per Click Google Ad-words, radio ads, etc

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

At a 35% CAGR, it takes 10 years for a SaaS company to grow from $5M to $100M in ARR

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

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

Even if a software company is growing at 60% annually, its chances of becoming a multibillion-dollar giant are no better than 50/50

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

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

How To Make Pricing A Constant Process In Your Organization

More Growth Strategy Stats

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

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

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

Three uses for the SaaS Guidelines

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%”

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

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

Only 8% of large companies use internet sales strategies. The proportion of companies relying on internet sales increases as company size decreases

56% treat “Existing Customer Renewals” as high priority

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