Templates by David Spitz

Here’s the TLDR on public SaaS metrics at year-end 2023 (medians):

- GROWTH: Anemic, but stable @ 18% 😴

- PROFIT MARGINS: continue to move up 🎉

>13% FCF

>14% Adj. EBITDA*

- GTM: Still a MESS...😒

> S&M % of Revenues @ 40% (35% excl. SBC*)

> S&M % of Net New ARR: @ 237% (202% excl. SBC*)

If you're looking at the chart and wondering why I'm not more sanguine about S&M trends as a % of Revenue... Sure it's improving modestly... but S&M relative to Net New ARR (what I call the GTM Spend Ratio)... is well above historical "healthy" norms. And this is the metric that matters most for GTM IMHO.

Note also that I've just introduced these GTM metrics w/out stock-based compensation expense. If you're a private companies looking to compare "apples to apples" against these metrics, make sure to compare yourself with the "excl. SBC" metric.

I’ll post more details in the coming days.

#SaaS #Metrics #Benchmarks

* Notes:

- SBC: Stock-based comp (manual process to back out of S&M, so only done for Q4)

- Adj. EBITDA: Earnings before interest, taxes, depreciation, amortization and SBC

- All data points in the charts are LTM (last 12 months)

Great analysis from David Spitz on the state of the SaaS market today. #SaaS #GTM. Short answer? It’s rough out there. With new ARR harder and harder to come by, efficiency matters now more than ever.

Tactics that generated ROI when everyone was buying every platform and solution out there simply will not necessarily perform in today’s lean and mean market.

Implication?

You better hurry up and find a way to make your product essential, and you better be ready to communicate that fact to your prospects/customers.

You can’t spend your way to growth anymore! (Just ask the folks in red on David Spitz’s chart 😬👀🫣)

At the #StripeSessions conference this week they pointed out a huge shift that will change #CustomerSuccess dynamics forever.

82% of SaaS companies, in a survey conducted late last year, said they plan to or already do charge by usage.

What does that mean as we shift from subscription revenue to transactional revenue?

✔ Sales will sell the right to do business, but CSMs will be responsible for generating the revenue. After all, if customers sign up but don't use it, the deal is worth $0. Comp plans should reflect this for both teams.

✔CS performance and business contribution are most commonly measured by NRR or GRR- Recurring Revenue. Different KPIs are needed for goal setting and performance management when some or all of the revenue is transactional.

✔Tooling needs to improve in many cases to help CSMs not just understand how customers are using what they bought but to give insights into the rate of consumption relative to the potential.

✔ The more they use, the more they pay. So the ROI has to be clearer because customers are fundamentally disincentivized from using your product unless they understand the value throughout the term, not just at renewal time.

✔ This shared risk model is better for customers but far less sticky for solution providers. Forecasting can be challenging and CSMs will need better training in order to roll up accurate info for their leaders to manage financials.

What else will this change? 👇

Historically, product led growth strategies were implemented by SaaS type cos who were looking for more self-serve solutions. Today, with the changes to the digital landscape around privacy and advertising, growth will need to be fueled through the product. You can implement PLG strategies regardless of whether you B2B, B2C, SaaS or not. Read post I wrote on how you can apply PLG strategies to your digital product today.

More and more companies are seeing the benefits of product-led growth.

With Gartner forecasting that 75% of SaaS providers will adopt PLG strategies by 2025, it’s evident that the era of product-led growth is upon us.

Ready to harness the true potential of your digital product? Check out our latest insight by Jeanette Cajide to see why product-led growth is essential to reaching your company's potential.

📈 https://bit.ly/48gtgJu

#ProductLedGrowth #DigitalProducts #IBMConsulting

Over the past 10 years, the global SaaS market grew at a CAGR of 25%.

In 2014, the SaaS industry was valued at $23.2 billion. Fortune Business Insights shows, the global SaaS market size was valued at $237.48 billion in 2022 and is projected to reach $908.21 billion by 2030, exhibiting a CAGR of 18.7%. The SaaS Industry has been growing this fast for the past 10 years!

Still more than 500 promising and innovative companies could not make it to 2024!

There are multiple reasons behind the curtains that nobody talks about, but need addressing. Read more here: https://lnkd.in/gDhehCuu

📊 Unlocking Growth Insights: February's SaaS Benchmark Breakdown!

Sofia Faustino, thank you for sharing these valuable insights from ChartMogul regarding February's SaaS growth benchmarks. The landscape shows some intriguing trends:

1️⃣ Steady Growth: Year-on-year recurring revenue remains stable at a median of 24% since October 2023.

2️⃣ Top Quartile Performance: Top quartile SaaS under $300k ARR sees a 6pp increase, hitting 125%.

3️⃣ Low NRR: Median NRR sets a new low at 62% in February, highlighting lower retention rates.

This evolving scenario prompts VCs to prioritize unit economics and profitability for 2024 investments.

How are these insights influencing your growth strategies this year? 📈

#saas #growth #chartmogul

Great article, Chris Price! 👏

Thanks for sharing!!

In the current economic landscape, securing capital has been a real struggle, making it crucial for SaaS CFOs to make difficult capital allocation decisions.

CFOs are now collaborating more closely than ever with fellow executives to find areas within their organizations that can drive efficient growth.

Accurate and consistent metrics that can be relied upon are crucial in these discussions. 📈💼

When doubt clouds the accuracy of metrics, discussions often veer off course, squandering valuable time as everyone debates the numbers...🤦♂️

If you've ever grappled with this challenge, this article is an invaluable read. 🙌📊

Hot off the press: OpenView and Paddle published their SaaS Benchmark Report 2023. 🔥

Here are 5 notable (yet, not surprising) insights:

1️⃣ - 73% of founders are worried about go-to-market execution (slide 21)

Talking to revenue leaders every day, this isn't surprising as:

- pipeline generation has stalled

- every deal is scrutinized for ROI

- NRR has dipped due to seat reduction and change in PMF for many SaaS players

2️⃣ - CAC payback has gotten worse (slide 36, picture below)

This stat supports the first point.

3️⃣ - Lean & mean (slide 23)

I think this is a good trend - fewer people, lower complexity & costs, more focus.

4️⃣ - Growth rates are down, period!

Median growth by ARR:

$5M - $20M:

- 2022: 47%

- 2023: 35%

$20M - $50M:

- 2022: 29%

- 2023: 24%

5️⃣ - Revenue efficiency (ARR per FTE) has grown a lot.

Median revenue per employee by ARR:

$5M - $20M:

- 2022: $106k

- 2023: $167k

$20M - $50M:

- 2022: $145k

- 2023: $212k

What do you think will this look like next year?

#saas #benchmarks #gotomarket #report