06/12/2022

SaaS Growth Metrics and Statistics To Grow Your SaaS Business

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It’s more than just acquiring customers and users to grow a SaaS business.

Growth in revenue and customer lifetime value can be measured. You can also measure it using the number of people who use your product.

You should also consider other important metrics when measuring growth in your SaaS business.

Many startups fail due to a lack of a viable business model. They don’t know how to grow their businesses.

Don’t make decisions in the dark! Let us instead look at the most important metrics and statistics for SaaS startups.

What does a SaaS company do?

SaaS is short for Software as a Service. 

SaaS companies provide software as a service. They can also make their software available online to other businesses.

These data can be viewed, accessed and used remotely by users through the web browser. 

This provider hosts the software and provides customer support.

Customers can access their software and data from anywhere,  

This gives the SaaS company more control than if they had to install it locally on their computers or in-house.

What’s a good rate of revenue growth for SaaS companies?

A company’s growth rate is the percentage increase in its revenues over a period of time. To calculate the growth rate, you must use the revenue from previous years and the current year.

I will show you how to quickly calculate your monthly growth rate.

(Current month revenue – Prior month revenue) / Prior months revenues * 100 = % Revenue growth rate

The growth rates of sales change with the company’s maturity. 

Startups offering SaaS services will see an average revenue growth of 15% to 45%.

What’s the Market Size for Saas Products?

SaaS has a significantly larger market share than any other software.

People are moving towards cloud-based applications and services.

Many people are switching to web-based software as they are portable and can be used anywhere.

The SaaS market is expected to be worth approximately 145.5 billion U.S. Dollars by 2021 ( Statista ).

Globally, the software-as-a-service (SaaS)market is expected to grow between 2020-2025.

The United States will experience the greatest increase in its GDP with 92 billion euros rising to 191 trillion Euros by 2025.

Essential SaaS Growth Metrics

What metrics should I be tracking? Many SaaS startups want to know what metrics they should be tracking.

1. Annual Recurring Revenue (ARR).

ARRR! The exclamation can be heard from every corner of the startup community.

This is the ultimate goal of many startups, even those who do not offer subscriptions.

An Annual Recurring Income (ARR ) is the most crucial metric for a subscription-based business.

ARR refers to the total revenue from recurring sales every year.

ARR = (Overall Subscriber Price per Year + Recurring Revenue From Add-ons, Upgrades) – Revenue lost because of Cancellations.

ARR can also be calculated by multiplying the MRR with 12.

2. Monthly Recurring Revenue (MRR).

Businesses that have recurring revenue are sustainable.

This indicator is great to monitor as it tells you whether you are getting more customers or if your existing customers are purchasing more of your products/services.

It is possible to compare the recurring revenue generated with the non-recurring sales made at the end each month.

The MRR = Average Income per Account* Total Number of Customers in the Month.

Note:

While the calculation might seem straightforward, there are a few things to consider when calculating your MRR.

  • Recurring revenue
  • Upgrades and downgrades
  • Customers churn
  • Get Discounts

3. Churn Rates

SaaS marketers often wonder how to lower their customer churn rates.

Churn rate indicates how many customers cancel their subscriptions or stop using the vendor’s services.

Churn rates can be important as they show how well a company retains customers.

You can learn more about your customers and better serve them.

The Churn rate = (Lost customers/Total customers at the beginning) * 100

Let’s say you had 140 customers in May but lost 12 customers by May end.

Your churn rate is (12/140)*100= 8.5%

Now that you’ve calculated your churn rate, it is time for you to make sure you’re doing everything you can to reduce it.

Churn rate can be a key metric to determine the profitability of your customer.

This will help you decide whether certain customers are worth keeping.

Here are some tips and tricks:

1.Don’t lose touch with your customers

  1. Customers should feel special
  2. Loyal and customer-oriented customer service should be the main focus
  3. Get feedback

4. Customer Lifetime Value (CLV),

Customer Value refers to the net profit a company has made from an average customer over the course of their relationship.

Customers are often referred to as the CLV.

A higher CLV indicates that individuals are more likely to be retained and offered additional value-added products and services.

CLV is a measure of customer worth. 

What kind of behavior is this customer displaying?

Are you repeating business?

Marketing by word of mouth?

Does this market have a stable or growing segment?

These steps will allow you to calculate your CLV:

Customer Lifetime Value = (the average order total average customer lifespan)

5. Cost of Acquiring Customers (CAC).

SaaS companies must spend money to acquire customers.

There are chances that you will get trial advertising or free advertising. This is the cost of acquiring a customer (CAC ).).

The cost of acquiring new clients is the biggest expense for most companies.

This is an excellent way to reduce this expense. You should focus your efforts into marketing channels that provide the highest return on ad spend.

The CAC is affected by three main factors: Customer Value, Acquisition Cost and Customer Lifetime Value.

CAC – Add all marketing and sales costs, including advertising, commissions, sales salaries and lead generation costs, and divide it by the number of customers you have.

You should not spend more than 3 to acquire customers.

It is important to know the SaaS statistics 

1. General SaaS Statistics

SaaS continues to grow at an amazing rate. These statistics will help you understand the trend.

– The company’s biggest challenge in 2021 was managing SaaS applications.

  • 49% solution to application sprawl
  • Unmanaged apps discovered 26%
  • Reduce unmanaged spending 14%

The global market for cloud computing is forecast to grow from USD 445.3billion in 2021 to USD 947.3 billion by 2026, at a Compound Annual Ratio (CAGR) of 16.3% during the forecast period.

– 18% The user satisfaction rating for all software products purchased is lower than 4 stars.

According to McKinsey only 28% of software and Internet services companies had revenues over $100 million while 31% had revenues above $1 billion. 

According to the same McKinsey study, companies with a growth rate of more than 60% to reach $100 million in revenues were eight times more likely to be successful than those that grow less than 20% to reach $1 billion in revenue.

2. Saas Market Statistics

In the United States, there were nearly 15.000 SaaS businesses. They also had over 14 billion global customers.

Who are the top SaaS firms? V.K. Pay had the highest e-commerce SaaS revenue of 580 million dollars.

– TOPK An app for advertisers that is rapidly growing with more than 30 million users in the U.S.

– The revenue grew to 252 billion US dollars in September 2021 from 161 billion in January 2020.

Shopify saw an 225% increase of traffic in 20 months, from $52 billion to $185 billion.

3. SaaS Churn Statistics

Churn, a vital metric for SaaS companies and the lifeblood subscription-based businesses, is essential.

This is something every SaaS company hates hearing. Customers stop using your product.

SaaS companies can be doomed by high churn rates. This usually means you’re losing money.

57% This is an acceptable SaaS Churn rate. It can be measured in revenue or customers.

SaaS average churn rate is around 5% A rate of 3% or less is considered a “good” rate.

High-growth companies have lower churn rates than those with low growth (around 42%).

Companies making less than $10,000,000 per year are eligible for 20% SaaS churn rates.

– Reports show that channel sales are at the highest level of 17%, while field sales range between 11% and 88%.

4. SaaS Pricing Statistics

If you are feeling discouraged about your startup’s growth, look at the bigger picture

Although things might seem overwhelming at the moment, it is not as important how you deal with them. 

– Based upon the data collected from 1.000 SaaS leaders

33% are leaders identified segments/personas while the remaining 13% are still testing the market.

They use transactions (37%), users (28%), and total employees (13%) as their primary metrics.

They also use value-based approaches (40%), competitor-based (26%), best judgment (25%), and a cost-plus (9%)

– 31% SaaS providers claim that they offer very few discounts. 

-More than 50,000 SaaS vendors offer a 30% discount to their customers.

The longest trial period is usually 30 days.

The global SaaS market will grow by $99.99 trillion between 2021-2025.

Statistics can help you understand and grow your SaaS company.

Here are the most important metrics to track for a complete picture of your company.

Companies must be nurtured and cared for if they are to thrive.

Having a good understanding of your industry will help you make informed decisions that will benefit your business.

FAQs:

1. Is Shopify a SaaS, or a SaaS for you?

Yes. Shopify is an eCommerce company that offers a variety of solutions through online shopping carts. Customers can access their technology via the Internet.

2. Which are the Top 5 Saas Ecommerce Marketplaces for Saas?

If you have an online business, you probably already know the best eCommerce platforms. You have the option to create your own.

  1. Magento Commerce
  2. BigCommerce
  3. SalesForce
  4. Shopify Plus
  5. Volusion

3. Netflix: Is it a SaaS?

Yes. Netflix is an American media services company based in Los Gatos, California.

It was established in 1997 by Marc Randolph in Scotts Valley, California. Their streaming service, which is subscription-based, allows you to stream a wide range of TV programs and movies online via an Internet connection.

About the author

Kobe Digital is a unified team of performance marketing, design, and video production experts. Our mastery of these disciplines is what makes us effective. Our ability to integrate them seamlessly is what makes us unique.