Fifteen years ago, the term software as a service (SaaS) was hardly used. Today however, is a much different story. With an estimated 11,000 SaaS companies now operating worldwide, growth in this sector has been exponential, and is expected to reach a staggering $623 billion by 2023.
At Virayo, we’re passionate about the SaaS space, and specifically helping our clients scale MRR with targeted search marketing campaigns.
In this article, we’ve compiled 40+ SaaS statistics covering everything from industry growth and churn to trial conversions and pricing strategies. Our hope is that this data will highlight new growth opportunities for your SaaS business in 2020.
Let’s jump in!
General SaaS Statistics
- In 2020, the SaaS market is expected to reach $157 billion in revenue
- That’s more than triple what the market reached in 2014, $48.8 billion
- SaaS delivery will significantly outpace traditional software product delivery, growing nearly five times faster than the traditional software market
- By 2020, the cloud software model will account for $1 of every $4.50 spent on software
- 80% of businesses use at least one SaaS application while 64% of them use at least one PaaS app and 48% use one or more IaaS apps
- Regardless of size, the majority of businesses (88%) are seriously intending to invest in new SaaS applications within two to three years
- 55% of SaaS companies rate Customer Retention Cost as the key metric to measure
- SaaS accounts for less than 15% of total enterprise software spending
- Increased automation and agility are seen to fuel the SaaS market’s growth
SaaS Churn Statistics
- Median annual churn rate for SaaS businesses is 20%
- Currently, a SaaS business with a 20% growth rate only has an 8% chance of being successful
- Companies making more than $10 million in revenue have an average churn rate of 8.5%
- Low-growth companies (42%) have seen high churn
- The acceptable churn rate is 5-7% annually
- 69% of SaaS businesses measure churn rates by the number of customers
- Field sales show the lowest churn rates at 11.8%
- Inside sales and Internet sales see churn rates of 14%
- Channel sales have the highest churn rate at 17%
SaaS Marketing And Sales Statistics
SaaS Trial Stats
- Nearly 40% (or a third) of SaaS companies said they do not offer any free trials or ‘freemium’ for their product or service
- 30 days is the most common free trial period
- Many SaaS product and service providers obtain 100% of their customers through conversions of free trials to paid subscribers
- Companies that do not ask for credit card info when signing up users for a free trial generate 2x as many paying customers in the end.
SaaS Sales & Acquisition Stats
- A survey of 5,000 stakeholders involved in B2B purchases, found that on average, 5.4 people now sign off on each purchase
- The average mid-sized company may have as many as 32 different billing owners
- The median cost to acquire $1 of annual recurring revenue (ARR) for a new customer is $1.32. Using upselling strategies with existing customers, the cost drops significantly to $0.71
- 48% of Saas Companies surveyed reported an average contract length of one year.
- 13% reported typical contracts were month-to-month
- 11% said their average contract length was three years or more
- The median startup spends about 92% of the first year average contract value on the sale itself
- Companies that spend more on sales and marketing (as a % of revenue) generally grew at a faster rate than those that spent less
- Less than 20% of new revenue comes from existing customers in the form of expansions and up-sells
- The average startup spends 92% of first-year revenue on customer acquisition
SaaS Marketing Stats
- The top 10% of SaaS blogs were found to receive 104,000 organic search visits/month
- 38 of the biggest 250 SaaS companies don’t have a blog
- SaaS companies invest between 80% and 120% of their revenue in sales and marketing in the first 5 years of their existence
- Internet sales-driven companies have a much greater reliance on marketing, with 65% of the median company’s CAC budget devoted to marketing
- The #1 result in Google has an average of 3.8x more backlinks than positions #2-#10
- Having a global, popular brand as a customer adds credibility and helps generate major second-order revenue via referrals
SaaS Pricing Stats
- About 40% of SaaS companies take a value-based approach with pricing
- 25% of SaaS companies simply copy competitors pricing
- 10% of SaaS companies take a cost-plus approach
- 38% of SaaS companies charge based on usage
- 31% of SaaS companies offer a small discount
- 38% of SaaS companies provide an occasional discount of 10-25%
- A 1% improvement in price can boost profits by 11%
- 54% of companies are offering annual pricing plans
There you have it – 40+ stats that show how fast the SaaS industry is growing. It’s clear that there are countless ways to grow your business, whether that’s by reducing churn or testing new trial and pricing strategies.
What’s your main focus for 2020?