Quote Info

Can I make more profit from my customers than it costs me to acquire them?

This is effectively a study of the unit economics of each customer. To answer the question, we need two metrics:

  • LTV – the Lifetime Value of a typical customer
  • CAC – the Cost to Acquire a  typical Customer

(For more on how to calculate LTV and CAC, click here.)

Entrepreneurs are usually overoptimistic about how much it costs to acquire a customer. This probably comes from a belief that customers will be so excited about what they have built, that they will beat a path to their doors to buy the product.

For Entrepreneurs.com

More SaaS + Software Stats

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

Publicly-traded SaaS companies have an average Revenue Per Employee of $200,000

The very best SaaS businesses have a negative revenue churn rate and will have a Revenue Retention Rate of greater than 100%

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%

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

After $10M in ARR, the median growth rate slows to just under 50%

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

Companies that spend more on sales and marketing (as a % of revenue) generally grew at a faster rate than those that spent less

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

More Growth Strategy Stats

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

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

When venture capitalists participate in seed rounds, the average round size is 3x larger

In 2018, the market size of information technology outsourcing amounted to 62 billion U.S. dollars.

The median Customer Acquisition Cost (CAC) for upsells is just $0.28 per $1, less than a quarter of the $1.18 spent to acquire $1 of revenue from a new customer

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

After $10M in ARR, the median growth rate slows to just under 50%

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

At a 35% CAGR, it takes 10 years for a SaaS company to grow from $5M to $100M in ARR

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