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  1. One of the key jobs of the CEO is to decide when to hit the accelerator pedal. The value of these two guidelines is that they help you understand when you have a SaaS business that is in good shape, where it makes sense to hit the accelerator pedal. Alternatively if your business doesn’t meet the guidelines, it is a good indicator that there is more tweaking needed to fix the business before you should expand.
  2. Another way to use the two guidelines is for evaluating different lead sources. Different lead sources (e.g. Google AdWords, TV, Radio, etc.) have different costs associated with them. The guidelines help you understand if some of the more expensive lead generation options make financial sense. If they meet these guidelines, it makes sense to hit the accelerator on those sources (assuming you have the cash).Using the second guideline, and working backwards, we can tell that if we are getting paid $500 per month, we can afford to spend up to 12x that amount (i.e. $6,000) on acquiring the customer. If we’re spending less than that, you can afford to be more aggressive and spend more in marketing or sales.
  3. There is another important way to use this type of guideline: segmentation. Early-stage companies are often testing their offering with several different uses/types of customers / pricing models / industry verticals. It is very useful to examine which segments show the quickest return or highest LTV to CAC in order to understand which will be the most profitable to pursue.
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More SaaS + Software Stats

Even if a software company is growing at 60% annually, its chances of becoming a multibillion-dollar giant are no better than 50/50

80% of venture capital investments take place in the enterprise

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

SaaS organizations are now operating in over 100 countries

SAAS companies that are focused mainly on enterprise sales have higher levels of professional services

The top 50% of the fastest growing SaaS businesses generate much higher upsells than their competitors. The larger the business, the greater the impact of upselling

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

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All types of investment have grown, year-on-year, with the biggest growth during the seed stage of financing

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

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

For SaaS companies valued at over $1billion, the median amount of financing raised is $206million

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

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

A 1% increase in pricing strategy yields an average 11% increase in profit

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

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

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

The top 50% of the fastest growing SaaS businesses generate much higher upsells than their competitors. The larger the business, the greater the impact of upselling