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

This is because they have to invest heavily upfront to acquire the customer, but recover the profits from that investment over a long period of time. The faster the business decides to grow, the worse the losses become. Many investors/board members have a problem understanding this, and want to hit the brakes at precisely the moment when they should be hitting the accelerator.

In many SaaS businesses, this also translates into a cash flow problem, as they may only be able to get the customer to pay them month by month.

SaaS + Software Stats

• How Often Should The Pricing Committee Be Meeting And Making Changes?
• SaaS, and other recurring revenue businesses are different because the revenue for the service comes over an extended period of time (the customer lifetime)
• The metrics that matter for each sales funnel, vary from one company to the next depending on the steps involved in the funnel
• 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
• The median TTM revenue growth rate + adj. EBITDA margin for publicly traded SaaS companies was ~37%, implying that just under one half met or exceed “The Rule of 40%”
• When determining Sales Capacity, “it’s worth noting that some percentage of new sales hires won’t meet expectations, so that should be taken into consideration when setting hiring goals. Typically we have seen failure rates around 25-30% for field sales reps, but this varies by company. The failure rate is lower for inside sales reps. can be counted as half of a productive rep”
• Companies with longer contracts (2+ years) reported the lowest annual unit churn
• More than two thirds of SAAS companies experienced annual churn rates of 5% or higher
• 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

SaaS & Tech Growth Strategy Stats

• In 2019, spending on IT services is expected to amount to 1,016 billion U.S. dollars worldwide
• Google only has a 30 percent female workforce
• Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable.
• To generate a single dollar of new customer revenue, Field Sales strategies have an average Customer Acquisition Cost (CAC) of $1.14
• It’s 4x cheaper to upsell existing customers than acquire new customers: costing just $0.28 to acquire an additional dollar of revenue
• 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)
• The 2015 median revenue growth rate was 44%, while the median projected growth rate for 2016 is 48%
• The median TTM revenue growth rate + adj. EBITDA margin for publicly traded SaaS companies was ~37%, implying that just under one half met or exceed “The Rule of 40%”
• Customer Acquisition Cost (CAC) = sum of all sales & marketing expenses/ number of new customers added