Software and online services are in a period of dizzying growth

Quote Info

Year-old companies are turning down billion-dollar buyouts in the hopes of multibillions in a few months. But we have seen similar industry phases before, and they have often ended with growth and valuations fizzling out. The industry’s booms and busts make growth, an essential ingredient in value creation, difficult to understand. To date, little empirical work has been done on the importance of revenue growth for software and Internet-services companies or how to find new sources of growth when old ones run out.

More SaaS + Software Stats

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

All types of investment have grown, year-on-year, with the biggest growth during the seed stage of financing

55% of SaaS companies rate Customer Retention as the key metric to measure

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

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

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

Is your SaaS business viable?

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

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

More Growth Strategy Stats

55% of SaaS companies rate Customer Retention as the key metric to measure

Only 8% of large companies use internet sales strategies. The proportion of companies relying on internet sales increases as company size decreases

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

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 median monthly revenue churn for large SaaS companies is 0.75%, translating into an annual revenue churn rate of 10%

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

Three uses for the SaaS Guidelines

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

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

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