Software and online services are in a period of dizzying growth

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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

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

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

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

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

Less than 20% of new revenue came from existing customers in the form of up-sell and expansion sales

The fastest growing SaaS companies raise an average of $9.5M in Series A funding

In 2017, IBM generated 37.8 billion U.S. dollars in global IT services revenue, making it the largest IT services company in the world in terms of net sales

In contrast to these, the median annual churn rate for smaller, private SaaS companies with less than $10M in revenue is 20%

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

In all SaaS businesses there will likely come a moment where they realize that not all customers are created equal

More Growth Strategy Stats

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

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

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

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

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

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

The very best SAAS companies keep monthly revenue churn at around 0.58%, that’s only about 7% revenue churn a year

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

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

They may forget what you said, but they will never forget how you made them feel.