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A great way to understand any business model is to answer the following simple question:

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

(How to calculate LTV and CAC)

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. The reality is often very different!

ForEntrepreneurs.com

More SaaS + Software Stats

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

Smaller SAAS companies reported more frequent use of third-party providers as their primary application delivery method, while the largest companies were more likely to use self-managed servers

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

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

Revenue Churn Rate = (RCR) (MRR at beginning of month – MRR at end of month) – MRR in upgrades during month / MRR at beginning of month

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

56% treat “Existing Customer Renewals” as high priority

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

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

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

More Growth Strategy Stats

Median annual gross dollar churn was 8%, 7%, 6% and 8% in 2016, 2015, 2014 and 2013

For a SaaS business of almost any scale, the valuation impact of better retention is in the tens of millions over time

Cloud-hosted applications have a 99% uptime

56% treat “Existing Customer Renewals” as high priority

The fastest growing SAAS companies averaged $250k in MRR and were only losing around 3.2% of that revenue each month to churn

Account Churn Rate (ACR) = customers at beginning of month – customers at the end of month / customers at beginning of month

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

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

Google only has a 30 percent female workforce

The boom in the industry is creating more jobs for techies. Data reveals there were 627,000 unfilled positions in tech in April 2017