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

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

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

SAAS companies that are focused mainly on enterprise sales have higher levels of professional services

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

Internet sales-driven companies have a much greater reliance on marketing, with 65% of the median company’s CAC budget devoted to marketing

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts

If the numerator of your quick ratio is growing that means your revenue is growing. It’s important to keep increasing revenue to counter any MRR (Monthly Recurring Revenue) that is lost to churn

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

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

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

More Growth Strategy Stats

In contrast to these, the median annual churn rate for smaller, private SaaS companies with less than $10M in revenue is 20%

In 2019, spending on IT services is expected to amount to 1,016 billion U.S. dollars worldwide

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

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

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

Negative Churn and Expansion Revenue

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

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

A 1% increase in pricing strategy yields an average 11% increase in profit

Women in western countries use the internet 17 percent more than their male counterparts