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

Quote Info

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

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

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

The median Customer Acquisition Cost (CAC) for upsells is just $0.28 per $1, less than a quarter of the $1.18 spent to acquire $1 of revenue from a new customer

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

The best SAAS businesses have a LTV to CAC ratio that is higher than 3, sometimes as high as 7 or 8

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

Gross dollar churn among companies with an internet go-to-market strategy saw a meaningful increase, up from 8% in 2015

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

High-growth companies are 8X more likely to reach $1 billion in revenues than those growing less than 20%.

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

More Growth Strategy Stats

It’s 4x cheaper to upsell existing customers than acquire new customers: costing just $0.28 to acquire an additional dollar of revenue

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

In 2018, the market size of information technology outsourcing amounted to 62 billion U.S. dollars.

Moving from $1.5 million with an eye towards $10 million in ARR is a tough a task and will take an excellent VP of sales to get you there

As companies scale their growth engines, a slightly-above-average churn rate becomes harder and harder to offset with net new revenue growth, especially when the goal is to outpace it by 4x

To establish a revenue or lead-commitment based on your funnel metrics and revenue-growth goals, work backward from the gross revenue amount that marketing is responsible for generating (generally around 40%)

The median annual contract value (ACV) was $25K, $21K, $21K, $20K in 2016, 2015, 2014 and 2013

SaaS IPOs have more than doubled over the last 12 years

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

It’s 9x cheaper to retain existing customers than acquire new customers: costing $0.13 to acquire any additional dollar of revenue