<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=755603531252450&amp;ev=PageView&amp;noscript=1">

B2B Digital Marketing Agency Blog

timg (2)-3.jpgtimg (2)-4.jpgtimg (2).jpg

timg (2)-1.jpgPerformance metrics can be incredibly valuable, a few key variables can make a big difference to the success of any SAAS business. It can however, be difficult to track every metric so this article has referenced 60 SAAS statistics to help marketers and business owners start to define what matters to their goals.

      SAAS Growth Statistics

Software companies quite often grow faster than companies in other sectors, so keeping a close eye on growth numbers & benchmarks metrics should not be neglected. 
  1. The 2016 median revenue growth rate was 48%, while the median projected growth rate for 2015 is 44%. (forentrepreneurs)
  2. 26% of SAAS companies with at least $15MM in 2015 GAAP revenue had a revenue growth rate + EBITDA margin of 40% or higher. (forentrepreneurs)
  3. 55% of SAAS companies rate Customer Retention Cost as the key metric to measure. (Totango)
  4. Unlike many other industries, if a software company grows at only 20%, it has 92% chance of ceasing to exist within a few years. (Mckinsey)
  5. Even if a software company is growing at 60% annually, its chances of becoming a multibillion-dollar giant are no better than 1/2. (Mckinsey)
  6. SAAS companies in the $7.5MM-$15MM range are among the fastest growers. (forentrepreneurs)
  7. High-growth companies offer a return to shareholders 5 times greater than medium-growth companies. (Mckinsey)
  8. High-growth companies were 8 times more likely to reach $1 billion in revenues than those growing less than 20%. (Mckinsey)
  9. Increases in revenue growth rates drive twice as much market-capitalization gain as margin improvements for companies with less than $4 billion in revenues. (Mckinsey)

    saas metrics

  10. 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%”. (forentrepreneurs)

    saas survey

  11. The average Quick Ratio of fastest growing SAAS companies (those with a CAGR of over 50%) is 3.9: generating $3.9 in revenue for every $1 lost to revenue churn. (InsightSquared)
  12. 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. (Tomasz Tunguz)
  13. 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. (InsightSquared)
  14. If the numerator of your quick ratio is growing that means your revenue is growing. It’s important to keep increasing revenue to counter any MRR (Monthly Recurring Revenue) that is lost to churn. (InsightSquared)

    SAAS Churn Statistics

    Since churn metrics are such critical elements for success in a SAAS company, it is an area that requires deeper exploration to understand.

    Making a small tweak to your churn rate can have a huge impact on the overall health of your business.

  15. The median annual unit churn for SAAS companies was 10% in 2016. (forentrepreneurs)
  16. More than 2/3 of the SAAS companies experienced annual churn rates of 5% or higher. (Totango)
  17. If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business, this will become a major drag on growth. (forentrepreneurs)
  18. Net-revenue churn improves with larger Average Contract Value (ACV), likely due to more structural churn among SMB customers and higher switching costs associated with larger contracts. (Mckinsey)

    saas metrics

  19. 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. (Mckinsey)
  20. Gross dollar churn among companies with an internet go-to-market strategy saw a meaningful increase, up from 8% in 2015. (forentrepreneurs)

    saas survey

  21. The fastest growing SAAS companies averaged $250k in MRR and were only losing around 3.2% of that revenue each month to churn. (InsightSquared)
  22. 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. (InsightSquared)
  23. 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. (Tomasz Tunguz)
  24. The very best SAAS companies keep monthly revenue churn at around 0.58%, that’s only about 7% revenue churn a year. (sixteenventures)
  25. The very best SAAS business has a negative churn rate, and will have a Dollar Retention Rate of greater than 100%. (forentrepreneurs)
  26. Median annual gross dollar churn was 8%, 7%, 6% and 8% in 2016, 2015, 2014 and 2013. (forentrepreneurs)
  27. The best SaaS companies achieve 5-7% annual revenue churn - equivalent to a loss of $1 out of every $200 each month. (sixteenventures)
  28. As with unit churn, companies with longer contracts (2+ years) tend to report lower annual dollar churn. (forentrepreneurs)
  29. Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts. (forentrepreneurs)

    Marketing and Sales Statistics

    It is important to analyse and research marketing and sales metrics when it comes to SAAS statistics. Putting more focus and resource on marketing and sales can not only ramp up leads and revenue, but it also helps you stay one step ahead of your competitors.

  30. Companies that spend more on sales and marketing (as a % of revenue) generally grew at a faster rate than those that spent less. (forentrepreneurs)

    saas metrics

  31. While field sales remains the most popular way to sell for companies >$2.5MM revenue, companies with <$2.5MM revenue tended to use inside sales as their primary mode of distribution. (forentrepreneurs)
  32. Analyzed by contract value, field sales are primarily evident for companies with median deals over $25K. Inside sales strategies are most popular for companies with $1K-$25K median deal sizes. (forentrepreneurs)
  33. SAAS companies invest between 80% and 120% of their revenue in sales and marketing in the first 5 years of their existence (Tomasz Tunguz).
  34. Internet sales-driven companies have a much greater reliance on marketing, with 65% of the median company’s CAC budget devoted to marketing. (forentrepreneurs)

    saas statistics

  35. 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. (forentrepreneurs)
  36. This is backed up as well by Totago: Less than 20% of new revenue came from existing customers in the form of up-sell and expansion sales. (Totango)
  37. SAAS companies that are focused mainly on enterprise sales have higher levels of professional services. Attach rates for Enterprise and SMB was 18% and 12% in 2016. (forentrepreneurs)
  38. It's time to establish a revenue or lead-commitment based on your funnel metrics and revenue-growth goals. Then lock these goals in with a service-level agreement between your marketing and sales teams. To do this, work backward from the gross revenue amount that marketing is responsible for generating (generally around 40%). (HubSpot)
  39. As you move from $1.5 million with an eye towards $10 million in ARR, it's going to take an excellent VP of sales to get you there. (HubSpot)
  40. High-growth companies generate 60% fewer sales opportunities than low-growth companies. (InsightSquared)
  41. SAAS companies need to track the number of visitors, trials and closed deals; And also track the conversion rates, with the goal of improving those over time. (forentrepreneurs)marketing metrics


    These conversion rates represent the ability to forecast future revenue and retention accurately, what’s more, it will impact staffing levels, sales & marketing program spend.

    It is important to measure the overall ROI from your lead generation activities. The biggest challenge and greatest limiting factor to growth is growing pipeline fast enough to feed the top of the funnel. Inbound marketing strategies can play a big role to help you drive up those numbers!

    Inbound Marketing

    Customer and Business Success Statistics

    SAAS companies run a unique model that is much more focused on customer success than many traditional models. For this reason, it is important to have a deeper insight into performance metrics to make sure everything is on track and growing in a sustainable way.

    Most SAAS companies could invest in acquiring more clients in order to grow faster, but many fall into the trap of neglecting customer success and retention.

    So, you may have invested the money and time to gain new clients, but you lose out on the full revenue potential of if they churn earlier than expected. By reducing the revenue headwinds caused by churn, companies with strong levels of customer success grow faster, and gain further revenues from upgrades / expansions.

    There are typically 3 key churn metrics: customer churn, gross-revenue churn, and net-revenue churn.

  42. More than 1/2 of SAAS companies increased their spending on customer retention last year. (Totango)
  43. The best SAAS businesses have a LTV to CAC ratio that is higher than 3, sometimes as high as 7 or 8. (forentrepreneurs)
  44. The median annual contract value (ACV) was $25K, $21K, $21K, $20K in 2016, 2015, 2014 and 2013. (forentrepreneurs)
  45. The average SaaS business generates 16% of its new Annual Contract Value (ACV) from upselling to existing customers. (RJMetrics)
  46. SAAS companies with >$250K median ACV book nearly 25% of their contracts at 3 years or longer. (forentrepreneurs)
  47. Companies with longer contracts (2+ years) reported the lowest annual unit churn. (forentrepreneurs)
  48. The average SaaS company spends just 6 hours determining their pricing strategy. (PriceIntelligently). Find out more and read our article on 'Which SAAS Pricing Model will work for you'.
  49. If you are charging $500 per month, you can afford to spend up to 12x that amount (i.e. $6,000) on acquiring a new customer. (forentrepreneurs)
  50. 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". (forentrepreneurs)
  51. The largest SaaS companies (>$75million yearly revenue) attribute 2.5x as much new revenue to upselling than the smallest SaaS companies (<$1.25million): 28% versus 11%. (RJMetrics)
  52. The median average contract length is 1.3 years and the average billing term is seven months in advance in 2016. Comparable to 2015, with average contract length shortening from 1.5 to 1.3 years and average billing period increasing by one month from 2015 to 7 months. (forentrepreneurs)

    saas metrics

  53. The average company booking professional services revenue on new deals is equivalent to 16% of the first year subscription value. Professional services margins are approximately 22%. (forentrepreneurs)
  54. 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. (forentrepreneurs)

    Useful SAAS Formulas

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

    David Skok has noted that there is a problem with using this formula, as you may have several expensive people in the team that should scale to handle a larger number of customers as you grow. In this case, your CAC will be too high. David suggested making a very simple adjustment to the Sales & Marketing expenses to take only a portion of those salaries and expenses in the early days. This will provide a better indication of how CAC will look in the future when you are at scale.

  56. Account Churn Rate (ACR) = customers at beginning of month - customers at the end of month / customers at beginning of month

    Account Churn is very important because it gives a very clear percentage of the customers that are leaving you. It takes away the bias from larger accounts so that you aren’t left with one large customer paying for all of your revenue - which is a dangerous situation to be in. (InsightSquared)

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

    You can achieve Negative Churn, which means you are adding MRR at a faster pace than you are losing it. (InsightSquared)

  58. Revenue Renewal Rate= (MRR up for the renewal at beginning of month- MRR not renewed at the end of month)/ MRR up for renewal at beginning of month)

    You need to be thinking about how the length of each contract will affect churn in a given period when you calculating renewal rate. (InsightSquared)

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

    The top SAAS companies have a LTV to CAC (the Cost to Acquire a typical Customer) ratio that is higher than 3. (forentrepreneurs)

  60. MRR churn %= churned MRR/ previous months MRR

    Defined as lost revenue due to churned customers as a percentage of total recurring revenue. Read our article '5 Ways to Reduce Churn Rate' for insight into how to tackle 'drifting customer's.

We hope you enjoyed the SAAS statistics that we have compiled - good luck with your planning!

Inbound Marketing for Tech Company Growth

Topics: SAAS Marketing

Viva Chan

Written by Viva Chan

Graduate Digital Marketing Manager responsible for the day to day management and monitoring of client campaigns. She works closely with the content and design teams and adds her in depth knowledge and creativity to all campaigns.

RELATED POSTS

10 SAAS Companies Who Rocked the Freemium Model
How to Calculate the Cost Per lead (CPL) for SAAS Companies
Which SaaS Pricing Model is Right For You?