Top 10 in Tech - What to know for Week ending April 1, 2021

Welcome to another Benchmark special! I get asked for more of this quite often and, as it's Easter, it's a bit of a recycle. So this is a compilation of benchmark data reported from across the webs….​

1. EXPANSION: Just acquiring customers isn’t enough of a strategy for long-term success: Expansion strategies are pragmatic growth practices that any good SaaS company needs to get a grip on as 37% of new ARR bookings are attributable to cross-sell/up-sell activities. Here is what good expansion looks like. OpenView Partners have gone to town to benchmark this metric with an extensive Expansion SaaS Benchmarks report. Product Led Growth businesses leads the pack!
2. RETENTION. To compliment #2 above, retention is deeply related to expansion as it relates to sustainable growth, and here is what good retention goals should be benchmarked against and how to optimize them.
3. CAC: This one needs nuance, David Skok, the godfather of SaaS Metrics has broken it down into i) blended, ii) new, iii) up-sell, and iv) expansion. It's getting hard out there though -  Every dollar of new revenue in 2020 costs $1.60 (compared to $1.35 in 2019). Up-sell and cross-sell still remain the CAC bargain, but it’s still up YoY, with each dollar of new revenue costing $0.69 in 2020 (it was $0.61 in 2019). Big impacts on sales efficiency. This chart alone highlights why having a customer-focused strategy is critical for growth. 
4. GROWTH: Median organic ARR growth for the year surveyed (2018) was 36%. Thus is across 424 SaaS businesses distributed globally (but 2/3 of which were US-domiciled). This rate is pretty evenly split across different contract size businesses - so there is no obvious relationship between ACV and growth. Companies surveyed average a median ARR of $8.7m 
5. MARKETING AND SALES: Hubspot continues to benchmark Pandemic-times data for core business metrics like website traffic, email send and open rates, sales engagements, close rates, and more (aggregated from their global customer base of over 70,000 companies). It’s an incredibly useful tool as a benchmark to measure your business against. Explore all the benchmark data here or check this week's summary here. Chorus.ai is doing something similar by benchmarking sales organizations (daily!) across their user base. A recent Tomasz Tunguz summary can be found here.
6. GTM: Current and pragmatic Go-To-Market benchmarks are presented in this deck from Tomasz Tunguz and the team at Redpoint Ventures. Some good findings from their survey: 1) If SDR/BDR teams hit their numbers, so do Account Executives; 2) Most sales teams ramp Account Executives in about six months; 3) Marketing teams spend 5-10% of a companies ARR. David Skok also observes that the primary mode of Sales and Marketing efforts remains Field Sales based, with Inside Sales taking a very close second strategy for smaller businesses (under $10m ARR)
7. UX: Optimizing a User Experience is key to the long-term success of any service or product. Google is all over this and just launched Web Vitals, a program that offers developers guidance about best practice benchmarks on user experience. It’s benchmarking very Google-based metrics: loading, interactivity, and visual stability.
8. PROFESSIONAL SERVICES: It’s a weird open secret that a lot of B2B SaaS businesses generate a significant amount of revenue from implementation and deployment projects, often captured as revenue from Professional Services, due to deployment and configuration complexity. So what are the revenue benchmarks for a SaaS Business to captured revenue through professional services? On average it caps out at 11% of all annual revenue with Enterprise-focused businesses but even at the lower end of town it’s still 5% of revenues with SMB focused businesses.
9. SPEND: Figuring out how to optimize marketing spend and growth rate is a key question and this study doesn’t show great benchmarks - the percentage of revenue in pretty much equals percentage growth out, but with an ever-increasing range of outcomes as spend increases per business. More solid benchmarks are with the Sales vs Marketing spend ratios which stay at about 2:1 regardless of market-facing strategies (although Mixed is a bit of an outlier).
10. BOOTSTRAPPERS: This is for all of you choosing the do-it-without-investors route: The latest State of Independent SaaS Report based on hundreds of non-venture track, revenue-generating SaaS companies. It has really great Bootstrapped benchmarks: growth rates, demographics, validation approaches, and more.

POD OF THE WEEK: Of course it’s going to be How to Succeed at SaaS with David Skok