If you are building a SaaS startup, you know exactly how well you are doing on your key metrics.
But then you wonder (and get asked), how well am I doing compared to other SaaS companies? And more importantly, if I knew the metrics of other SaaS companies, would I adjust my strategy?
Each year Pacific Crest, an investment banking firm that specializes in SaaS firms, conducts a survey of key operational and financial metrics.
The survey participants included 155 companies from around the world (but mostly from the U.S.). About a third (58) of the companies were small with under $2M in revenue.
David Skok, at his For Entrepreneurs blog, published the results of the 2013 Pacific Crest SaaS Survey. It’s a long post with fascinating detail. Here are eight graphs from the survey. See Skok’s article for the rest.
Revenue growth rates
Though historical growth rates are at about 40%, the companies this year are more optimistic about their forecast. The median expectation for growth in the coming year is 47%.
If you exclude the smaller companies (<$2M Revenue), then the historical median growth rate is lower, 32%. And the forecast is also lower for the larger companies, 36%.
Size of customer contract
The median annual contract size was $20K per customer. So let’s say you charge a monthly fee of $49 per seat and have 35 seats at a customer, that customer would produce $20K in revenue per year.
If you look at the entire group of survey respondents, Internet Sales produces the highest growth rate (90%). But if you exclude the smaller companies (<$2M Revenue), Internet Sales drops way down to 23%. The mode of distribution with the highest growth rate for the larger companies is Inside Sales (37%).
Cost to acquire customers
It costs much less to produce revenue from upsells and renewals, only $0.17 and $0.14. A good reason to keep churn rates low!
Customer churn rates
Median customer churn rates were 9% (excluding companies <$2M in revenue).
Median gross margins were around 76%. This was consistent across both large and small companies.
Freemium or “Try Before You Buy?”
Although about 25% of the companies use the Freemium model, it produces few leads that convert into revenue. Companies use the Try-Before-You-Buy model more successfully. About two thirds of them use this model and it produces more leads that produce revenue.
How can you use these numbers?
- When you model a business and want rules of thumb for reference.
- When you set internal goals.
- When you make decisions about strategy.
- When you talk about your progress and plans with an external party (customer, investor, or employee recruit).