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Upsells key to growth and scale

As shown in the chart below, companies that have made it past the $40MM revenue mark use upsells to drive a much higher percentage of their new Average Contract Value (ACV) than smaller companies. In fact, companies in the $40-75MM revenue range attribute twice as much new revenue to upsells as the median company.

Of course, it’s dangerous to imply causation here. There are a number of reasons why we might see this effect in later-stage companies. One unexciting possibility is that their overall growth in new business is slowing down and it’s skewing these percentages in favor of upsells. Let’s look at this data through another lens and explore how upsells are related to growth.

RJMetrics

More SaaS + Software Stats

It’s 4x cheaper to upsell existing customers than acquire new customers: costing just $0.28 to acquire an additional dollar of revenue

High-growth companies generate 60% fewer sales opportunities than low-growth companies

The median TTM revenue growth rate + adj. EBITDA margin for publicly traded SaaS companies was ~37%, implying that just under one half met or exceed “The Rule of 40%”

When determining Sales Capacity, “it’s worth noting that some percentage of new sales hires won’t meet expectations, so that should be taken into consideration when setting hiring goals. Typically we have seen failure rates around 25-30% for field sales reps, but this varies by company. The failure rate is lower for inside sales reps. can be counted as half of a productive rep”

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

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

Is your SaaS business viable?

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

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

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

More Growth Strategy Stats

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

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

How To Make Pricing A Constant Process In Your Organization

SAAS companies invest between 80% and 120% of their revenue in sales and marketing in the first 5 years of their existence

SaaS IPOs have more than doubled over the last 12 years

Women in western countries use the internet 17 percent more than their male counterparts

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

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

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

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