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

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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.

More SaaS + Software Stats

For a SaaS business of almost any scale, the valuation impact of better retention is in the tens of millions over time

How to Reduce Churn

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

Getting paid in advance is really smart idea if you can do it without impacting bookings, as it can provide the cash flow that you need to cover your cash problem

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

SaaS IPOs have more than doubled over the last 12 years

Is your SaaS business viable?

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

The metrics that matter for each sales funnel, vary from one company to the next depending on the steps involved in the funnel

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

More Growth Strategy Stats

Less than 20% of new revenue came from existing customers in the form of up-sell and expansion sales

Our experiences with SaaS startups indicate that they usually start with a couple of lead generation programs such as Pay Per Click Google Ad-words, radio ads, etc

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

The average company gets 16% of new ACV sales from up-sells and expansions, though companies with revenue between $10MM-$40MM are relying more heavily on up-sell and expansions

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

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

In 2019, spending on IT services is expected to amount to 1,016 billion U.S. dollars worldwide

The median cost for a SaaS company to acquire a dollar of new customer revenue is $1.18

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

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