In this blog series we profile three core metrics for SaaS companies: revenue growth, churn and margin, from startup to $200 million dollar business. These metrics define a target profile that a SaaS company can use to compare their own performance.
Best in Class SaaS - Profiles In Maturity
Over the last three blog posts we have created target models for revenue growth, churn and margin for a best in class SaaS business. From those models, we can profile companies at three stages of maturity: early stage ($10m revenue), pre-IPO ($100m revenue) and mature ($200m revenue). The table below shows the profiles.
Annual | Early Stage | Pre-IPO | Mature |
Revenue | $10m | $100m | $200m |
Next Year Growth | 77% | 25% | 10% |
Margin | -37% | 15% | 30% |
Churn | 19% | 6% | 3% |
Clearly there are many other variables that will influence the valuation of a SaaS business, such as ROIC and Enterprise Value. However, as a guideline these metrics represent a base P&L profile of business performance that can be useful to track against over time.
It is obvious as we go from left to right that the business focus incrementally shifts from top left (growth) to bottom right (churn). Organizations will journey through focusing on sales driven growth, to operational efficiency, to customer success. What is often under-valued however, is how the opportunity funnel can be widened during the growth phase by setting the foundations for continuous improvement on operations and customer experience. We know that loyal customers are 60% more likely to buy additional products or services from a partner.
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