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

SaaS + Software
Statistic in SaaS & Tech Growth Strategy

Statistic Info

Inside Sales Driven Companies Grow Fastest Inside sales driven distribution companies grow about 40% faster than companies using field sales, web sales or channel, or about 37% revenue growth per year.

Price the Product Between $1k to $25k Annually to Optimize Growth Companies with contract sizes of $1k to $25k grow the fastest, about 26% faster or 35% y/y. I suspect there are two reasons to support this pattern. First, purchases under $25k tend to require fewer approvals which decreases sales cycle. Second, these accounts can be closed by inside sales reps which are far less expensive than field sales. On the same sales investment, a startup may be able to hire three or four inside sales reps for each field sales rep.

Cost of Customer Acquisition is About 11 Months’ of Revenue The median startup spends about 92% of first year average contract value on the sale, implying an 11 month payback period on the CAC. An additional months’ revenue is required to upsell a customer and about the same is required to close a renewal.

Tomasz Tonguz

More SaaS + Software Stats

SaaS businesses face significant losses in the early years (and often an associated cash flow problem)

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

To establish a revenue or lead-commitment based on your funnel metrics and revenue-growth goals, work backward from the gross revenue amount that marketing is responsible for generating (generally around 40%)

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

55% of SaaS companies rate Customer Retention as the key metric to measure

Three uses for the SaaS Guidelines

Internet sales-driven companies have a much greater reliance on marketing, with 65% of the median company’s CAC budget devoted to marketing

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

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

As companies scale their growth engines, a slightly-above-average churn rate becomes harder and harder to offset with net new revenue growth, especially when the goal is to outpace it by 4x

More SaaS & Tech Growth Strategy Stats

More than two thirds of SAAS companies experienced annual churn rates of 5% or higher

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

Investment in marketing automation tools is expected to reach $25 billion by the year 2023

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

The median monthly revenue churn for large SaaS companies is 0.75%, translating into an annual revenue churn rate of 10%

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

Revenue per employee has been steadily increasing in SAAS companies. It serves as a great longitudinal measuring stick to understand the increasing or decreasing efficiency of the business

They may forget what you said, but they will never forget how you made them feel.

If a software company grows at 20% annually, it has a 92% chance of ceasing to exist within a few years

As companies scale their growth engines, a slightly-above-average churn rate becomes harder and harder to offset with net new revenue growth, especially when the goal is to outpace it by 4x

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