Key Data Behind Expansion-Stage
SaaS Companies
Expansion-stage SaaS companies have an overarching goal to grow very fast and achieve sustainable
profitability. Understanding the operating metrics behind other expansion-stage SaaS companies can help
them form an optimal economic model. With that in mind, OpenView Venture Partners recently surveyed
more than 160 senior executives and consultants at SaaS companies to create a report that is specifically
focused on some of the growth and profitability metrics that are most relevant to SaaS companies at the
expansion stage. Below are some of the report's key findings.
1.
Revenue Growth Rate
Does revenue growth rate depend on the company’s size?
Average Annual Revenue Growth Rate
Percentage
Growth Rate
Deviation
100%
80%
61%
50%
52%
100K - 250K
250K - 500K
60%
48%
43%
44%
1M - 2M
2M-5M
52%
40%
20%
< 100K
500K - 1M
>5M
Monthly Recurring Revenue Range ( $ )
As companies mature, their growth trajectory does not necessarily decline to a lower, more
predictable rate. In fact, some large companies still manage to scale rapidly while maintaining
a breakneck rate of growth.
2.
Average Revenue Per Employee
What’s the average annual revenue per employee?
Average Revenue Per Employee ( $M )
Average Revenue
Per Employee ( $M )
Deviation
1.00
0.90
0.80
0.70
0.60
0.60
0.50
0.40
0.30
0.20
0.10
0.10
0.05
< 100K
100K - 250K
0.12
250K - 500K
0.24
0.20
0.17
500K - 1M
1M - 2M
2M-5M
>5M
Monthly Recurring Revenue Range ( $ )
Companies earning between $3.5 million and $5 million of MRR appear to hit a major inflection
point in terms of how efficient they are with their human resources.
3.
Sales & Marketing Spend as a
Percentage of Annual Revenue
What percentage of annual revenue is budgeted for sales and marketing?
Percentage
S&M Expense
Average Sales & Marketing Expenditure as a Percentage of Annual Revenue
Deviation
100%
80%
60%
39%
29%
40%
37%
42%
38%
32%
22%
20%
< 100K
100K - 250K
250K - 500K
500K - 1M
1M - 2M
2M-5M
>5M
Monthly Recurring Revenue Range ( $ )
Early-stage companies have to spend a considerable portion of their revenue on sales and
marketing to gain traction in most markets. At later stages, when revenue is
stronger and budgets are bigger, companies have to grow their sales and marketing
efforts accordingly to achieve the same kinds of results.
4.
Relationship Between Revenue
Growth and Sales & Marketing
Spending Levels
How important is sales and marketing spending level to revenue growth?
Average Sales & Marketing Spending as a Percentage of Revenue Growth (%)
Percentage
S&M Expense
Deviation
100%
73%
80%
45%
60%
40%
17%
24%
30%
30%
28%
20-30
30-40
40-50
34%
55%
40%
23%
20%
< 10
10-20
50-60
60-70
70-80
80-90
90-100
>100
Monthly Recurring Revenue Growth Rate ( % )
There appears to be a minimum level of sales and marketing spending (20 percent) that is
required to effectively grow an expansion-stage SaaS business.
5.
Relationship Between Revenue
Growth and Sales and Marketing
Efficiency
What’s the sales and marketing cost to gain one dollar of additional revenue?
Average Sales & Marketing Dollars Spent per Dollar of Additional Revenue
S&M Expense
($)
Deviation
3.50
2.80
2.10
1.58
1.23
1.20
1.40
0.89
0.68
0.83
0.70
< 10
10-20
20-30
30-40
40-50
50-60
0.57
0.64
0.66
60-70
70-80
80-90
0.76
0.42
90-100
>100
Monthly Recurring Revenue Growth Rate ( % )
We can see that the range of values narrows significantly for companies that are growing the
fastest and spending the most efficiently, indicating that the resulting growth is generally
strongly correlated to this measure of sales and marketing efficiency.
DOWNLOAD A FREE COPY OF THE FULL REPORT HERE:
http://labs.openviewpartners.com/expansion-stage-saas-metrics/
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