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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

As with unit churn, companies with longer contracts (2+ years) tend to report lower annual dollar churn

The average company gets 16% of new ACV sales from up-sells and expansions, though companies with revenue between $10MM-$40MM are relying more heavily on up-sell and expansions

Growth rate accelerates in the expansion stage ($2.5M – $10M ARR)

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

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

Achieving a SaaS Quick Ratio of 4 is a good benchmark for young, high-growth companies but the equation changes as those companies reach scale

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

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

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

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

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)

General Dynamics is a market leader in the aerospace and defense industry. In 2018, a total of 105,600 people were working at General Dynamics.

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

Only 8% of large companies use internet sales strategies. The proportion of companies relying on internet sales increases as company size decreases

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

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

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

Sony’s PlayStation brand had accumulated approximately 38.57 million fans on the social network

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

At a 35% CAGR, it takes 10 years for a SaaS company to grow from $5M to $100M in ARR