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In the first 3 years, these public SaaS companies spend between 80 to 120% of their revenue in sales and marketing (using venture dollars or other forms of capital to finance the business). By year 5, that ratio has fallen to about 50% where it remains for the life of the business.

Despite the divergent revenue ramps, the marketing and sales spend patterns for these companies resemble each other strongly and serve as good benchmarks for high-growth SaaS startups.

In case you’re curious, below is the “typical” revenue growth trajectory for these SaaS companies: $50M in year five, $100M in year ten.

Tomasz Tonguz

More SaaS + Software Stats

SaaS, and other recurring revenue businesses are different because the revenue for the service comes over an extended period of time (the customer lifetime)

Negative Churn and Expansion Revenue

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

54% treat upselling and add-on sales as high priority

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

Japanese company Hitachi accounted for three percent of the world’s market for diagnostic imaging in 2017.

Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable.

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

SaaS companies in the $7.5MM-$15MM range are among the fastest growers

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

The median TTM revenue growth rate + adj. EBITDA margin for publicly traded SaaS companies was ~37%, implying that just under one half met or exceed “The Rule of 40%”

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

If the numerator of your quick ratio is growing that means your revenue is growing. It’s important to keep increasing revenue to counter any MRR (Monthly Recurring Revenue) that is lost to churn

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%

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)

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

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

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

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

The average SaaS company spends just 6 hours determining their pricing strategy

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