Top 10 in Tech - What to know for Week ending December 13, 2024

​1. ARR GROWTH: The 2024 SaaS Performance Metrics Benchmark report indicates a decline in revenue growth efficiency, with metrics like Blended CAC Ratio and Net Revenue Retention showing downward trends. Read more here.


2. SPEND: Capital Efficiency is back in Vogue! According to Bessemer Venture Partners, here are the benchmarks for B2B SaaS to measure your payback against (full report here). Across all companies, Engineering is consistently the largest department, Customer Success and Product at about 10% and Marketing at only 7%. This slide also has median headcount by stage - which is a great metric to track.


3. GES: Growth Endurance Score is a metric that assesses a company's ability to sustain growth over time. GES measures this efficiency by factoring in both net retention and customer acquisition efficiency. A high GES correlates with long-term business health and resilience. Bessemer has plotted ARR growth lost YoY, and found that the decay is fairly predictable with a Benchmark at 30%. In other words, you should expect next year's growth rate to be 70% of the current year as the stakes get higher.


4. EXPANSION: Acquiring customers is not enough for a SaaS company's sustained long-term success, and expansion strategies are pragmatic and capital-efficient growth practices that any good SaaS company needs but are getting harder to come by. Top quartile companies have been hit hard, seeing NRR drop from 119% to 107%. But at scale, more growth is coming from expansion vs. new. The proportion of ARR gained from expansion has increased from 28.8% in 2020 to 32.3%. In comparison, the proportion of ARR gained from the new business has fallen from 62.0% to 57.9%. NRR is the new normal for B2B SaaS.


5. CHURN: 40% of SaaS businesses with ARR in the $15-30m range have negative churn, and, on average, startups with ARPA over $1k have negative churn. The higher the ARPA, the lower the monthly net MRR churn rate. This is because of lower gross churn and higher expansion revenue at higher ARPAs. This article notes that a monthly churn rate below 5% is healthy, while under 3% is best-in-class


6. RETENTION: To complement #4 and #5 above, retention is deeply related to churn (obviously) but also to expansion. Chartmogul, in their SaaS Growth Trends report, notes that retention strategies are now being viewed as growth strategies. And last year, Companies with best-in-class retention grew at least 1.8x faster than their peers. Check out this other great ChartMogul article that outlines how to calculate, benchmark, and track retention.


7. PRICING: Last year, the median impact on NDR from changing pricing was a +14% increase among expansion-stage software companies. Message heard! 78% of respondents changed pricing and/or packaging. If international expansion is your thing, look at regional friction points: local payment methods (invoices, credit cards, PayPal, and region-specific methods), billing, and tax compliance.


8. SPEND: Capital Efficiency is back in Vogue! According to Bessemer Venture Partners, here are the benchmarks for B2B SaaS to measure your payback against (full report here). Across all companies, Engineering is consistently the largest department, Customer Success and Product at about 10% and Marketing at only 7%. This slide also has median headcount by stage - which is a great metric to track.


9. ARR per FTE: Pulling this from Openview's SaaS Benchmarks Report again; it's the newly popular efficiency metric! For many companies, Annual Recurring Revenue (ARR) per Full-Time Employee (FTE) has emerged as a primary performance indicator, signifying team productivity and doing more with less. There have been significant yearly increases in ARR per FTE across all bands of startups surveyed, and this metric ranges significantly based on stage/revenue ($42k to 250k median based on ARR).


10. BENCHMARKS: And finally, a motherlode of bookmarkable benchmarks with the 2024 BenchmarkIT Report (all B2B SaaS), and it's pretty interactive (or snag the PDF here). Median growth for SaaS companies is 30%, and Net Revenue Retention (NRR) is at 105%. Median Customer Acquisition Cost (CAC) payback is 16 MONTHS! and here is one of my favorites - an average of $.69 per $1 of expansion revenue generated.


POD OF THE WEEK: This is actually a whole Podcast for you to follow called SaaS Talk by Dave "CAC" Kellogg and Ray "Growth" Rike.