THE 2015 PACIFIC CREST SaaS SURVEY SaaS by …...10-15% >5% 5-10% 15-20% 40% 31% 10% 9% 10% How Much...
1
DEFINITIONS Payback Months of subscriptions gross profit to recover fully loaded cost to acquire. ACV Annual Contract Value of a subscription agreement. CAC Cost to acquire $1 of new annual contract value. Includes the fully-loaded amount spent on Sales and Marketing for the win. DRR Net dollar retention rate is the change in annual contract value from existing customers subtracting churned ACV but adding in renewal and upsell ACV. How Much Does It Cost to Acquire New Customers? INVEST MORE $1.18 ACQUIRE $1 of New Customer ACV $0.28 UPSELL Exisiting Customers $0.13 RENEWALS Exisiting Customers MEDIAN CAC SPEND MEDIAN CAC SPEND Per primary mode of distribution FIELD SALES $ 0.42 INSIDE SALES $ 0.66 $ 0.90 CHANNEL SALES $ 1.14 INTERNET SALES CAC SPEND BY PRIMARY MODE OF DISTRIBUTION >$3.00 $1.00 - $3.00 <$1.00 100% 80% 60% 40% 20% 0% FIELD SALES INSIDE SALES CHANNEL SALES INTERNET SALES CAC: SPEND TO ACQUIRE $1 OF NEW ACV 0 20 10 30 40 50 < $0.50 $0.50- $1.00 $1.00 - $1.50 $1.50 - $2.00 $2.00 - $3.00 >$3.00 Median $1.18 SPEND PER $1 OF NEW ACV COMPANIES The cost of adding new revenue from existing customers is a small fraction - 24% - of the cost to add revenue from a new customer. CAC varies significantly, even among companies using a similar distribution strategy. CAC, or customer acquisition cost, is a critical benchmark for any SaaS company. CAC PAYBACK PERIOD (GROSS MARGIN BASIS) Respondents showed a median CAC payback of 12 months, but this was highly variable. PAYBACK PERIOD % OF COMPANIES 31% 30% 20% <6 MOS 7 -12 MOS 13-18 MOS 19-24 MOS 2-3 YEARS 8% 11% Go-to-Market: What’s the Best Distribution Strategy? SELL MORE Field sales is still the most common approach, driven by large contract sales. Smaller contract sales rely on the internet and inside sales but there is no clear strategy for companies selling in the middle. PRIMARY MODE OF DISTRIBUTION: ALL COMPANIES Field Sales still dominates. Field Sales Inside Sales Internet Sales Channel Mixed DISTRIBUTION STRATEGY $15K-$50K MEDIAN CONTRACT SIZE Field-Dominated $ Revenue Growth Rate Revenue per FTE Annual Gross Dollar Churn Net Dollar Retention Rate Customer Aquisition Cost (CAC) $1.09 $1.04 Inside-Dominated Analysis of Field vs. Inside Sales in Key Crossover Deal Size Tiers $117K $131K 28% 29% 7% 12% 106% 115% $20MM $11MM 41% 5% 28% 21% 5% GO-TO-MARKET BY CONTRACT SIZE How do SaaS Companies Determine Which Go-to- Market Strategy to Execute? Internet Channel Inside Mixed Field PRIMARY MODE OF DISTRIBUTION $1K - $5K $5K - 15K $15K - $25K $25K - $50K $50K - $100K $100K - $250K >$250K <$1K % OF COMPANIES MEDIAN CONTRACT SIZE (ACV) 46% 8% 15% 23% 8% 19% 8% 27% 35% 11% 10% 10% 45% 23% 13% 3% 3% 34% 41% 17% 3% 5% 24% 24% 45% 4% 7% 37% 52% 5% 18% 77% 8% 31% 62% Field Sales have... But ... Higher revenue Lower churn Are less efficient Have lower propensity to upsell and expand What Drives Growth? GROW MORE Companies spending more on sales & marketing, as well as those showing success with a “land-and-expand strategy” (i.e., upsells) are growing faster than their peers. HOW FAST DID YOU GROW GAAP REVENUES IN 2014? >100% 80-100% <%15MM $15MM to $40MM >$40MM 50-80% 20-50% <20% 2015E Median 46% 2014 Median 44% Median ≈ 16% 2014 GAAP REVENUE GROWTH RATE COMPANIES $ $ $ $ $ 95 43 23 69 63 12% 15% 14% 24% 27% 37% Faster growing companies have a higher % of new ACV from upsells than slower growing companies. Growth rates were up from 37% in 2013. LEVERAGING UPSELLS FOR FASTER GROWTH 2014 GAAP REVENUE TOP 50% GROWERS BOTTOM 50% GROWERS 32% MEDIAN SALES & MARKETING SPEND As a % of Revenue SALES & MARKETING SPEND VS. GROWTH RATE 0% 10% 20% 30% 40% 50% <10% 10-15% 15-20% 20-25% 25-30% 30-35% 35-40% 40-50% 50-60% 60-80% >80% SALES & MARKETING SPEND AS A % OF REVENUE 2014 GAAP REVENUE GROWTH RATE As companies scale, low churn and high net dollar retention are critical to delivering growth with long-term profits. ANNUAL GROSS DOLLAR CHURN % OF COMPANIES >20% 10-15% <5% 5-10% 15-20% 40% 31% 10% 9% 10% 20 25 30 35 40 ANNUAL NET DOLLAR RETENTION FROM EXISTING CUSTOMERS COMPANIES 0 5 10 15 <80% 80-90% 90-95% 95-100% 100% 100-105% 105-110% 110-120% >120% NET CHURN 100% + NET RETENTION Churn greater than upsells Upsells greater than churn 104% MEDIAN ANNUAL NET DOLLAR RETENTION From Existing Customers 7% MEDIAN ANNUAL GROSS DOLLAR CHURN By comparison, at $100MM revenue run rate, public SaaS companies spent a median of 44% on sales & marketing. Those growing more than 35% are spending significantly more on sales & marketing – an optimal strategy for those with a decent payback period supported by their available capital. For the fourth year in a row, we’re delighted to partner with Pacific Crest Securities to present the deepest set of SaaS growth and operations data to date. By benchmarking core metrics, we hope to empower SaaS companies to better manage their growth. A big thanks to all the forEntrepreneurs readers who participated! To see full survey results and my insights, visit www.forentrepreneurs.com/2015-survey SaaS by the Numbers THE 2015 PACIFIC CREST SaaS SURVEY A Infographic FROM DAVID SKOK Cheers, David Skok
Transcript of THE 2015 PACIFIC CREST SaaS SURVEY SaaS by …...10-15% >5% 5-10% 15-20% 40% 31% 10% 9% 10% How Much...
DEFINITIONSPaybackMonths of subscriptions gross profit to recover fully loaded cost to acquire.
ACVAnnual Contract Value of a subscription agreement.
CACCost to acquire $1 of new annual contract value. Includes the fully-loaded amount spent on Sales and Marketing for the win.
DRRNet dollar retention rate is the change in annual contract value from existing customers subtracting churned ACV but adding in renewal and upsell ACV.
Lorem Ipsum
GROW MORE
As companies scale, churn and net dollar retention rates are critical to growth.
ANNUAL NET DOLLAR RETENTION FROM EXISTING CUSTOMERS
COMPANIES 0 5 10 15 20 25 30 35 40
<80%
80-90%
90-95%
95-100%
100%
100-105%
105-110%
110-120%
>120%
NET CHURN
100% + NET RETENTION
Churn greater than upsells
Upsells greater than churn
104%MEDIAN ANNUAL NET DOLLAR RETENTION From Existing Customers
ANNUAL GROSS DOLLAR CHURN
% OF COMPANIES
>20%
10-15%
>5%
5-10%
15-20% 40%
31%
10%
9%
10%
How Much Does It Cost to Acquire New Customers?
INVEST MORE
$1.18ACQUIRE $1 of New Customer ACV
$0.28UPSELL Exisiting Customers
$0.13RENEWALSExisiting Customers
MEDIAN CAC SPEND
MEDIAN CAC SPENDPer primary mode of distribution
FIELD SALES
$0.42INSIDE SALES
$0.66 $0.90CHANNEL SALES
$1.14INTERNET SALES
CAC SPEND BY PRIMARY MODE OF DISTRIBUTION
>$3.00$1.00 - $3.00<$1.00
100%
80%
60%
40%
20%
0%FIELD SALES
INSIDE SALES
CHANNEL SALES
INTERNET SALES
CAC: SPEND TO ACQUIRE $1 OF NEW ACV
0 2010 30 40 50
< $0.50
$0.50- $1.00
$1.00 - $1.50
$1.50 - $2.00
$2.00 - $3.00
>$3.00
Median$1.18
SP
END
PER
$1
OF
NEW
AC
V
COMPANIES
The cost of adding new revenue from existing customers is a small fraction - 24% - of the cost to add revenue from a new customer.
CAC varies significantly, even among companies using a similar distribution strategy.
CAC, or customer acquisition cost, is a critical benchmark for any SaaS company.
CAC PAYBACK PERIOD (GROSS MARGIN BASIS)
Respondents showed a median CAC payback of 12 months, but this was highly variable.
PAYBACK PERIOD
% OF COMPANIES 31% 30% 20%
<6 MOS 7 -12 MOS 13-18 MOS 19-24 MOS 2-3 YEARS
8%11%
Go-to-Market: What’s the Best Distribution Strategy?
SELL MORE
Field sales is still the most common approach, driven by large contract sales. Smaller contract sales rely on the internet and inside sales but there is no clear strategy for companies selling in the middle.
PRIMARY MODE OF DISTRIBUTION: ALL COMPANIES
Field Sales still dominates.
Field SalesInside SalesInternet Sales
Channel Mixed
DISTRIBUTION STRATEGY
$15K-$50K MEDIAN CONTRACT SIZE
Field-Dominated
$
Revenue Growth RateRevenue per FTEAnnual GrossDollar Churn
Net Dollar Retention Rate
Customer Aquisition Cost (CAC)
$1.09
$1.04
Inside-Dominated
Analysis of Field vs. Inside Sales in Key Crossover Deal Size Tiers
$117K
$131K
28%
29%
7%
12%
106%
115%
$20MM
$11MM
41%
5%
28%
21%
5%
GO-TO-MARKET BY CONTRACT SIZE
How do SaaS Companies Determine Which Go-to-Market Strategy to Execute?
InternetChannelInsideMixedField
PRIMARY MODE OF DISTRIBUTION
$1K - $5K
$5K - 15K
$15K - $25K
$25K - $50K
$50K - $100K
$100K - $250K
>$250K<$1K
% O
F C
OM
PAN
IES
MEDIAN CONTRACT SIZE (ACV)
46%
8%
15%
23%
8%
19%
8%
27%
35%
11%
10%
10%
45%
23%
13%
3%3%
34%
41%
17%
3%5%
24%
24%
45%
4%
7%
37%
52%
5%
18%
77%
8%
31%
62%
Field Sales have...
But ...
Higher revenueLower churn
Are less efficientHave lower propensity to upsell and expand
What Drives Growth?
GROW MORE
Companies spending more on sales & marketing, as well as those showing success with a “land-and-expand strategy” (i.e., upsells) are growing faster than their peers.
HOW FAST DID YOU GROW GAAP REVENUES IN 2014?
>100%80-100% <%15MM $15MM to $40MM >$40MM50-80%20-50%<20%
2015E Median46%
2014 Median 44%
Median ≈ 16%
2014 GAAP REVENUE GROWTH RATE
COMPANIES
$ $ $ $ $
95
43
23
6963
12%15% 14%
24%27%
37%
Faster growing companies have a higher % of new ACV from upsells than slower growing companies.
Growth rates were up from 37% in 2013.
LEVERAGING UPSELLS FOR FASTER GROWTH
2014 GAAP REVENUETOP 50% GROWERSBOTTOM 50% GROWERS
32%MEDIAN SALES & MARKETING SPEND As a % of Revenue
SALES & MARKETING SPEND VS. GROWTH RATE
0%
10%
20%
30%
40%
50%
<10%10-15%
15-20%
20-25%
25-30%
30-35%
35-40%
40-50%
50-60%
60-80%
>80%
SA
LES
& M
AR
KET
ING
SP
END
A
S A
% O
F R
EVEN
UE
2014 GAAP REVENUE GROWTH RATE
As companies scale, low churn and high net dollar retention are critical to delivering growth with long-term profits.
ANNUAL GROSS DOLLAR CHURN
% OF COMPANIES
>20%
10-15%
<5%
5-10%
15-20% 40%
31%
10%
9%
10%
20 25 30 35 40
ANNUAL NET DOLLAR RETENTION FROM EXISTING CUSTOMERS
COMPANIES 0 5 10 15
<80%
80-90%
90-95%
95-100%
100%
100-105%
105-110%
110-120%
>120%
NET CHURN
100% + NET RETENTION
Churn greater than upsells
Upsells greater than churn
104% MEDIAN ANNUAL NET DOLLAR RETENTION From Existing Customers
7%MEDIAN ANNUAL GROSS DOLLAR CHURN
By comparison, at $100MM revenue run rate, public SaaS companies spent a median of 44% on sales & marketing.
Those growing more than 35% are spending significantly more on sales & marketing – an optimal strategy for those with a decent payback period supported by their available capital.
For the fourth year in a row, we’re delighted to partner with Pacific Crest Securities to present the deepest set of SaaS growth and operations data to date. By benchmarking core metrics, we hope to empower SaaS companies to better manage their growth. A big thanks to all the forEntrepreneurs readers who participated!
To see full survey results and my insights, visit www.forentrepreneurs.com/2015-survey
SaaS by the Numbers
THE 2015 PACIFIC CREST SaaS SURVEY
A InfographicFROM DAVID SKOK
Cheers,
David Skok
