The average Quick Ratio of fastest growing SaaS companies (those with a CAGR of over 50%) is 3.9: generating $3.9 in revenue for every $1 lost to revenue churn

Statistic Info

When we looked at the fastest growing SaaS companies in our study (those with a CAGR of over 50%) we found an average Quick Ratio of 3.9.

These SaaS companies averaged $250k in MRR and were only losing around 3.2% of that revenue each month to churn. They are, in other words, exactly the type of SaaS startup that Mamoon looks for when deciding where to invest.

And, as their high Quick Ratio implies, they have a great chance to continue growing quickly and healthfully, and eventually become one of those fabled SaaS companies with a run rate of more than $10 million.

However, once we started digging deeper, the story became a little more complicated (and more interesting).

More SaaS + Software Stats

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

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

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

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

More than 1/2 of SAAS companies increased their spending on customer retention last year

Analyzed by contract value, field sales are primarily evident for companies with median deals over $25K. Inside sales strategies are most popular for companies with $1K-$25K median deal sizes

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business

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

How to Reduce Churn

The median SaaS business loses about 10% of its revenue to churn each year and that works out to about 0.83% revenue churn a month

More Growth Strategy Stats

Is your SaaS business viable?

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

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

The top 50% of the fastest growing SaaS businesses generate much higher upsells than their competitors. The larger the business, the greater the impact of upselling

In 2017, Foxconn Technology Group achieved a net income of 135.37 billion New Taiwanese dollars, the equivalent to approximately 4.55 billion U.S. dollars.

The fastest growing SaaS companies scale their organizations rapidly, growing their teams by an average of 56% each year

As of December 2018, there were total 105,000 employees in Lockheed Martin, as compared to 126,000 employees in 2015.

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

While field sales remains the most popular way to sell for companies >$2.5MM revenue, companies with <$2.5MM revenue tended to use inside sales as their primary mode of distribution

Getting paid in advance is really smart idea if you can do it without impacting bookings, as it can provide the cash flow that you need to cover your cash problem