Quote Info

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

26% of SAAS companies with at least $15MM in 2015 GAAP revenue had a revenue growth rate + EBITDA margin of 40% or higher

The median annual unit churn for SAAS companies was 10% in 2016

Companies with longer contracts (2+ years) reported the lowest annual unit churn

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

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

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

80% of venture capital investments take place in the enterprise

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

More Growth Strategy Stats

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

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

How To Make Pricing A Constant Process In Your Organization

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

Internet sales strategies are the only sales method to see a decline in CAC, dropping from $0.54 to $0.42 between 2014 and 2015

51% of large (revenue >$2.5million) SaaS companies use field sales as their primary method of distribution

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

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts

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

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%