Top 10 in Tech - What to know for Week ending January 12, 2024

Happy New Year, and welcome to the Benchmark Holiday special! This is a compilation of helpful benchmark data reported from across the web last year for you to put to good use.

ARR per FTE

Pulling this from Openview's 2023 SaaS Benchmarks Report, 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 in 2023, signifying team productivity and doing more with less. Significantyearly increases in ARR per FTE have occurred from 2022 to 2023 across all bands of startups surveyed. This metric ranges significantly based on stage/revenue ($42k to 250k median based on ARR).

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 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%.

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.

RETENTION

To complement #2 and #3 above, retention is deeply related to Churn (obviously) but also to Expansion. Chartmogul, in their SaaS Growth Trends in 2023 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.

PRODUT LED GROWTH

As mentioned in #3 above (and from me from time to time in this newsletter), Product Led Growth(PLG) businesses lead the pack when it comes to Expansion. PLG companies also deserve their own benchmark reports - so I got you covered with this one where you can benchmark 1000+ PLG companies (it was only 450 companies a year ago). A few factoids: Organic leads are still leading the pack but have decreased Year on Year from 2022 (39% of all traffic) to 2023 (32% of all traffic) - most of that shift has been absorbed by old fashioned Sales, Paid Marketing, and Partners. When it comes to trials, Expansion is harder to come by, and NDR is falling

CAC PAYBACK

The 'payback' period is the nuance of why we measure CAC. How long until we break even? Benchmark-wise, the negative trough is way longer than you think, so take a seat! New B2B customers, on average, take 2 years and 2 months to become profitable. This highlights a deepening dependency on access to capital to fund a SaaS company's growth through these SaaS Cash Flow Troughs.

GROWTH

Good news - growth is not deteriorating. The bad news is that it's not improving, especially at the early stages. There are signs of future positivity as best-in-class startup growth is accelerating and new business activity is picking up.

MARKETING AND SALES

Last year KeyBanc noted marketing spend dropped 31%. This year, SaaS Capital benchmarks the median percent of annual recurring revenue spent on marketing, which remains unchanged at 10%. The median percent of annual recurring revenue spent on selling costs is 15%, down 6% from last year.

PRICING

Last year, the median impact on NDR from changing pricing was a +14% increase among expansion-stage software companies. Message heard! As this year's survey showed, 78% of respondents changed pricing and/or packaging (but you must put your time in). 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.

SPEND

Capital Efficiency is back in Vogue! According to Bessemer Venture Partners, here are the benchmarksfor 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 - a great metric to track.