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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.

For Entrepreneurs.com

More SaaS + Software Stats

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

The fastest growing SAAS companies averaged $250k in MRR and were only losing around 3.2% of that revenue each month to churn

The very best SAAS business has a negative churn rate and will have a Dollar Retention Rate of greater than 100%

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

The median startup spends 92% of first year revenue on customer acquisition, taking 11-months to payback their Customer Acquisition Cost

Even if a software company is growing at 60% annually, its chances of becoming a multibillion-dollar giant are no better than 50/50

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

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

When venture capitalists participate in seed rounds, the average round size is 3x larger

Investment in marketing automation tools is expected to reach $25 billion by the year 2023

More Growth Strategy Stats

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

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

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

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

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

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

High-growth companies offer a return to shareholders 5 times greater than medium-growth companies

How to Reduce Churn

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)

Smaller SAAS companies reported more frequent use of third-party providers as their primary application delivery method, while the largest companies were more likely to use self-managed servers