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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.

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More SaaS + Software Stats

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

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

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

The median SaaS business generates 16% of its new Annual Contract Value (ACV) from upselling to existing customers

The average company booking professional services revenue on new deals is equivalent to 16% of the first year subscription value. Professional services margins are approximately 22%

80% of venture capital investments take place in the enterprise

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business; this will become a major drag on growth

A 2017 SaaS Capital survey showed that young companies actually have higher retention rates than more mature SaaS businesses

Software and online services are in a period of dizzying growth

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

More Growth Strategy Stats

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

Growth rate accelerates in the expansion stage ($2.5M – $10M ARR)

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

How To Make Pricing A Constant Process In Your Organization

The largest SaaS companies (>$75million yearly revenue) attribute 2.5x as much new revenue to upselling than the smallest SaaS companies (<$1.25million): 28% versus 11%

Analyzed by contract value, field sales are primarily evident for companies with median deals over $25K. Inside sales strategies are most popular for companies with $1K-$25K median deal sizes

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

If you are charging $500 per month, you can afford to spend up to 12x that amount (i.e. $6,000) on acquiring a new customer

Since churn is so important, wouldn’t it be useful if we could predict in advance which customers were most likely to churn?

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