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

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.

More SaaS + Software Stats

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

Three uses for the SaaS Guidelines

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

Internet Sales strategies have a significantly lower CAC of just $0.42

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

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

Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable.

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business; which may have a dramatically negative effect on your company’s growth. Source: Mckinsey

The statistic shows the worldwide IT spending on enterprise software from 2009 to 2020.

How to Reduce Churn

More Growth Strategy Stats

SaaS, and other recurring revenue businesses are different because the revenue for the service comes over an extended period of time (the customer lifetime)

Unlike many other industries, if a software company grows at only 20%, it has a 92% chance of ceasing to exist within a few years

51% of large (revenue >$2.5million) SaaS companies use field sales as their primary method of distribution

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

Internet Sales strategies have a significantly lower CAC of just $0.42

Customer Acquisition Cost (CAC) = sum of all sales & marketing expenses/ number of new customers added

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

How To Make Pricing A Constant Process In Your Organization

Gross dollar churn among companies with an internet go-to-market strategy saw a meaningful increase, up from 8% in 2015

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%