Is your SaaS business viable?

SaaS + Software
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The first is a good way to figure out if you will be profitable in the long run, and the second is about measuring the time to profitability (which also greatly impacts capital efficiency).

The best SaaS businesses have a LTV to CAC ratio that is higher than 3, sometimes as high as 7 or 8. And many of the best SaaS businesses are able to recover their CAC in 5-7 months. However many healthy SaaS businesses don’t meet the guidelines in the early days, but can see how they can improve the business over time to get there.

The second guideline (Months to Recover CAC) is all about time to profitability and cash flow. Larger businesses, such as wireless carriers and credit card companies, can afford to have a longer time to recover CAC, as they have access to tons of cheap capital. Startups, on the other hand, typically find that capital is expensive in the early days. However even if capital is cheap, it turns out that Months to recover CAC is a very good predictor of how well a SaaS business will perform. Take a look at the graph below, which comes from the same model used earlier. It shows how the profitability is anemic if the time to recover CAC extends beyond 12 months.

For Entrepreneurs.com

More SaaS + Software Stats

How to Reduce Churn

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

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

More than 1/2 of SAAS companies increased their spending on customer retention last year

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

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

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

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

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

Software and online services are in a period of dizzying growth

More Growth Strategy Stats

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

56% treat “Existing Customer Renewals” as high priority

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

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

It’s essential to have a point of view that puts a stake in the ground and breaks through the clutter.

The very best SaaS businesses have a negative revenue churn rate and will have a Revenue Retention Rate of greater than 100%

In 2017, the world invested around 3.4 billion U.S. dollars in small hydropower technologies, down from 3.9 billion U.S. dollars in 2016.

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

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

Customer Segmentation analysis will help point out which are your most profitable segments

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