Three uses for the SaaS Guidelines

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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.

More SaaS + Software Stats

The median Customer Acquisition Cost (CAC) for upsells is just $0.28 per $1, less than a quarter of the $1.18 spent to acquire $1 of revenue from a new customer

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

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

Customer’s lifetime value (LTV)= average revenue per user (ARPU) / monthly churn rate

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

In contrast to these, the median annual churn rate for smaller, private SaaS companies with less than $10M in revenue is 20%

Our experiences with SaaS startups indicate that they usually start with a couple of lead generation programs such as Pay Per Click Google Ad-words, radio ads, etc

The average SaaS business generates 16% of its new Annual Contract Value (ACV) from upselling to existing customers

Between the SMB and Enterprise customer types, the top-quartile performers not only have net-revenue churn that is 14% to 23% percentage less than the average performers but also have net-revenue churn that is negative in an absolute sense

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

More Growth Strategy Stats

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

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

A 2017 SaaS Capital survey showed that young companies actually have higher retention rates than more mature SaaS businesses

A University of Texas study showed that women ask for $7,000 less than their male counterparts in job interviews

orecasts suggest that global blockchain technology revenues will experience massive growth in the coming years, with the market expected to climb to over 23.3 billion U.S. dollars in size by 2023.

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

47% of millennials want to work at diverse companies, according to a recent study.

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

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%)

In 2017, Foxconn Technology Group achieved a net income of 135.37 billion New Taiwanese dollars, the equivalent to approximately 4.55 billion U.S. dollars.