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

Statistic Info

High-growth companies scale their teams very quickly. In fact, the companies in the sample set grew their teams by 56% annually over five years, which nets out to about 8.5x growth, from 204 employees to 1750 employees on the median.

Despite the massive growth of these organizations, the best companies are able to maintain or even accelerate their revenue per employee. In fact, increases in revenue per employee as a company scales is an incredibly positive sign of the health of the business. It indicates that the company is achieving economies of scale. Those economies of scale may exist as a consequence of a strong brand, monopoly-like characteristics within their market segment, improving sales efficiency, increases in contract size, better rates of customer upsells, etc. But in all cases, it’s a hallmark of a company whose economics are improving with time.

More SaaS + Software Stats

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

The best SAAS businesses have a LTV to CAC ratio that is higher than 3, sometimes as high as 7 or 8

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

The ultimate solution to the churn problem is to get to Negative Churn

How to Reduce Churn

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

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

SaaS IPOs have more than doubled over the last 12 years

Customer’s lifetime value (LTV)= average revenue per user (ARPU) / monthly churn rate

55% of SaaS companies rate Customer Retention as the key metric to measure

More Growth Strategy Stats

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

Software and online services are in a period of dizzying growth

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

The median annual contract value (ACV) was $25K, $21K, $21K, $20K in 2016, 2015, 2014 and 2013

Unlike many other industries, if a software company grows at only 20%, it has a 92% chance of ceasing to exist within a few years

Three uses for the SaaS Guidelines

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

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

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

In 2018, the market size of information technology outsourcing amounted to 62 billion U.S. dollars.