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

From For Entrepreneurs.com
Quote in SaaS & Tech Growth Strategy

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.

More SaaS + Software Stats

To generate a single dollar of new customer revenue, Field Sales strategies have an average Customer Acquisition Cost (CAC) of $1.14

Growing faster has twice as much impact on share price as improving margins

More than two thirds of SAAS companies experienced annual churn rates of 5% or higher

Cloud application services (SaaS) to reach $126 billions by the end of 2021

As with unit churn, companies with longer contracts (2+ years) tend to report lower annual dollar churn

The median annual unit churn for SAAS companies was 10% in 2016

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

Cloud-hosted applications have a 99% uptime

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

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

More SaaS & Tech Growth Strategy Stats

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

As with unit churn, companies with longer contracts (2+ years) tend to report lower annual dollar churn

Growing faster has twice as much impact on share price as improving margins

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

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

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

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

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

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business

Increases in revenue growth rates drive twice as much market-capitalisation gain as margin improvements for companies with less than $4 billion in revenues