In all SaaS businesses there will likely come a moment where they realize that not all customers are created equal

SaaS + Software
Quote in Growth Strategy

Quote Info

As an example, bigger customers are harder to sell to, but usually place bigger orders, and churn less frequently. We need a way to understand which of these are most profitable, and this requires us to segment the customer base into different types, and compute the unit economics metrics for each segment separately. Common segments are things size of of customer, vertical industry, etc.

Despite the added work to produce the metrics, there is high value in understanding the different segments. This tells us which parts of the business are working well, and which are not. In addition to knowing where to focus and invest resources, we may recognize the need for different marketing messages, product features. As soon as you start doing this segmented analysis, the benefits will become immediately apparent.

For each segment, we recommend tracking the following metrics:


More SaaS + Software Stats

Is your SaaS business viable?

SaaS IPOs have more than doubled over the last 12 years

Getting paid in advance is really smart idea if you can do it without impacting bookings, as it can provide the cash flow that you need to cover your cash problem

The average Quick Ratio of fastest growing SaaS companies (those with a CAGR of over 50%) is 3.9: generating $3.9 in revenue for every $1 lost to revenue churn

Gross dollar churn among companies with an internet go-to-market strategy saw a meaningful increase, up from 8% in 2015

51% of large (revenue >$2.5million) SaaS companies use field sales as their primary method of distribution

The average company booking professional services revenue on new deals is equivalent to 16% of the first year subscription value. Professional services margins are approximately 22%

Net-revenue churn improves with larger Average Contract Value (ACV), likely due to more structural churn among SMB customers and higher switching costs associated with larger contracts

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

The best place to hide a dead body is page 2 of Google search results.

More Growth Strategy Stats

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

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

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

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

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

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

Customer Acquisition Cost (CAC) = sum of all sales & marketing expenses/ number of new customers added

SaaS solutions have the highest security features with 95% security failures due to human error

Software and online services are in a period of dizzying growth

SAAS companies need to track the number of visitors, trials and closed deals; And also track the conversion rates, with the goal of improving those over time

Looking for SaaS focused services?
SaaS Website Design
SaaS SEO Agency