75 Best Practice SaaS Benchmarks for your Business Case
Preface SaaS Benchmarks
This post is part of a series of posts on understanding SaaS Metrics, applying SaaS Benchmarks, building a recurring revenue business model, scaling the right sales plan and win funding for a SaaS business with a lean case.
I would like to thank David Skok and Steve Blank for their work which has inspired me tremendously. While presenting my own SaaS startup accells to investors and VCs, I came across David Skok’s blogs on SaaS metrics and Saas Models and Steve Blank’s Udacity Online Course on How To Build a Startup using the Lean Startup and Business Model Canvas approach. After we sold accells successfully to Ping Identity, I developed a strong desire to share my experience with other entrepreneurs. My goal was simple: to increase their chances for financing and success.
This is why I started working on Lean-Case, a simulation tool for recurring revenue models, two years ago. I want you to avoid the pitfalls I have seen, by using the right formulas, applying the right assumptions, making the business case look appealing, and building a model to support scenarios and continuous analysis and tracking. Originally, benchmarking was an integral concept in Lean-Case but I learned that there was no single benchmarking data source that Lean-Case could leverage, but that there was a wealth of information regarding benchmarks spread across the web. This is how the idea for a separate service developed which we have called Lean-Marks.
75 Best Practice Benchmarks for your SaaS Business
This post provides SaaS entrepreneurs, Business Managers and Investors with an overview of top resources for SaaS and Software benchmarks.
Across those resources, we have selected 75 best practice benchmarks to make reasonable assumptions in numerous situations … when creating your SaaS business case, when finding the right growth strategy, when trying to understand your performance or reviewing an investment proposal. You find all these benchmarks plus many more online at Lean-Marks.
What are the benefits and limitations of benchmarks
Benchmarking is a common practice and sensible exercise to establish baselines, define best practices, identify improvement opportunities, and understand how to compete. Benchmarking helps companies gain an independent perspective. They can understand how well they perform against peers, identify and prioritize specific areas of improvement, validate assumptions as well as set performance expectations.
Benchmarking works well when the process being benchmarked is a standard one and essentially is the same for all units (either internal or external) participating in the exercise. For example, it’s useful to compare the cost of developing the same widget, providing the same kind of online support or using the same kind of cloud service. But benchmarking is not informative when it is used to compare fundamentally different processes or products. For example, Dropbox would probably not benefit from studying SAP’s selling process, a start up would not benefit from comparing its churn rate with the churn rate of public SaaS companies such as Salesforce or Box. Be reasonable and do not compare Apples and Oranges – simplistic benchmarking using aggregate statistics only has certain validity.
At MoveToSaaS, we combine benchmarking with the strategic process of finding the right business focus. SaaS companies must focus on the right metrics for each stage of their product growth lifecycle.
- Early stage startups building a minimum viable product must focus on churn, feature use, and survival financing.
- Later stage startups ramping up marketing and sales must focus on key metrics like churn, cost-of-customer acquisition, and growth financing.
- Growth companies scaling their business and increasing their geographic scopemust focus on key metrics such as customer acquisition cost (CAC), customer lifetime value (CLTV), customer segmentation, and geographic expansion.
How Do I Use Benchmarking in my Business Plan?
If I want to convince potential investors that my business idea is viable, to what extent and how should I use a benchmarking comparison of successful companies and consequently shape my plan?
Benchmarking based on available information about similar companies in other markets can be a useful way to add granularity and credibility to your business plan. Depending on how much information on these other examples you have, applying the benchmark company growth patterns, or ramp-up numbers, or market penetration can be useful.
But be careful as you do this. You should be sensitive to the factors you are considering because they come from a different time and a different market, and may not be relevant to your own business. Be respectful of these differences, and if at all possible adjust your numbers to reflect them. These adjustments will add to credibility to your plan.
We’ve seen plans and pitches in which entrepreneurs simply apply somebody else’s growth rate or profitability to their own projections. And potential investors wonder if those projections are relevant to your business. It’s a natural reaction, so anticipate it.
So, yes, use results from similar companies to help build your early projections. But do it carefully and with adjustments for your specifics. Then, it will give your plan credibility.
Where to find benchmarks for your SaaS and Software Business
There are many great sources to find and check benchmarks online. They cover countless insights on the general business economics, funding, sales and marketing, customer success as well as product and software development.
However, they are not easy to find, they only focus on specific functions or topics, it is difficult to put them into context, they come in PDF format and they cannot be searched and compared. On such a basis, it becomes really hard to check them out and make meaningful decisions.
This is why we setup Lean-Marks to cover the best sources of publicly available SaaS and Software benchmarks in one place for the following target groups:
- Entrepreneurs – require benchmarks to understand the unit economics of a customer, build their business case, evaluate their startups’ performance
- Operational Executives – use benchmarks to assess their functional performance, e.g. revenue and customer growth, spending levels, ..
- CFOs – need benchmarks to assess their companies’ performance and growth plans against specific peer companies
- Investors – have to be able to evaluate the performance of their portfolio companies
Fig. 1: Lean-Marks
On Lean-Marks (see figure 1), you can kick off searching for benchmarks with a fulltext search (e.g. enter the keyword “quota”).
Lean-Marks shows relevant results for your search (see figure 2). With the search bar on your right, you can refine your search (e.g. search by benchmark publication or searching by several keyword categories).
Fig. 2: -Marks Search Results and Search Bar
Each benchmarks is referenced, tagged and visually represented (see figure 3).
Fig. 3: Lean-Marks Benchmark Example
All benchmark sources covered on Lean-Marks enjoy high social media activity and virality. Lean-Marks is your starting point to dig deeper into them.
This post and the corresponding e-book provide a subset of benchmarks which are available on Lean-Marks.
If you come across other benchmark sources which Lean-marks should cover, please let us know.
Benchmark Sources Covered
This is the overview of Benchmark Sources which Lean-Marks currently covers. Please refer to the appendix for an in-depth description of each source.