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

Quote Info

In other words, software companies must grow quickly to survive. Slow growing businesses suffer from the lack of oxygen that fuels growth. Raising money is more expensive. Hiring becomes challenging. Without the capacity to invest capital in growth or the ability to compete for top talent, the slow growth cycle reinforces itself.

The McKinsey study breaks down rapid growth into two parts. In part one, the authors identify five key factors of success in the early stages. Large market; logical revenue model; rapid-adoption; stealth/secrecy; proper compensation of the leadership team.

This list will surprise no one, except perhaps for stealth. Is secrecy and stealth a prerequisite to success for every massive software company? For most bottoms-up businesses, stealth isn’t a competitive advantage, but awareness is.

Part two is more interesting. The defining characteristic of enduring software businesses is they “master the transition from one act to the next.” Fast-growth startups must metamorphose constantly because the market demands it of them.

More SaaS + Software Stats

The very best SAAS business has a negative churn rate and will have a Dollar Retention Rate of greater than 100%

Moving from $1.5 million with an eye towards $10 million in ARR is a tough a task and will take an excellent VP of sales to get you there

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

Analysed by contract value, field sales are primarily evident for companies with median deals over $25K. Inside sales strategies are most popular for companies with $1K-$25K median deal sizes

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts. Source: ForEntrepreneurs

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

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

The 2015 median revenue growth rate was 44%, while the median projected growth rate for 2016 is 48%

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

54% treat upselling and add-on sales as high priority

More Growth Strategy Stats

Achieving a SaaS Quick Ratio of 4 is a good benchmark for young, high-growth companies but the equation changes as those companies reach scale

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)

It’s 9x cheaper to retain existing customers than acquire new customers: costing $0.13 to acquire any additional dollar of revenue

The top 50% of the fastest growing SaaS businesses generate much higher upsells than their competitors. The larger the business, the greater the impact of upselling

Best-in-class SaaS companies achieve 5-7% annual revenue churn – equivalent to a loss of $1 out of every $200 each month

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

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

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

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%)

Sony’s PlayStation brand had accumulated approximately 38.57 million fans on the social network