Return-Path: Delivered-To: andrew@sterlingcal.com Received: from reseller401.webserversystems.com by reseller401.webserversystems.com with LMTP id 8Ob0OMenHmZOIAUAchKAPA (envelope-from ) for ; Tue, 16 Apr 2024 11:31:03 -0500 Return-path: Envelope-to: andrew@sterlingcal.com Delivery-date: Tue, 16 Apr 2024 11:31:03 -0500 Received: from o15.ptr5735.mail.beehiiv.com ([159.183.141.187]:9756) by reseller401.webserversystems.com with esmtps (TLS1.2) tls TLS_ECDHE_RSA_WITH_AES_128_GCM_SHA256 (Exim 4.96.2) (envelope-from ) id 1rwli2-001PfZ-24 for andrew@sterlingcal.com; Tue, 16 Apr 2024 11:31:03 -0500 DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=mail.beehiiv.com; h=content-type:from:mime-version:subject:reply-to:list-unsubscribe:to: cc:content-type:from:subject:to; s=s1; bh=n4Bo4oBpErszmnymY2e/ycwCbLjhS1kNELVvrfO8QOU=; b=kuTh+xnJaP4xQHoTZgyrANi65GjqnJxrfK+VnfcPRtpbeLpovmOC56BwEusOlHlja/NA LIWWT5cLMxTnguHS6MMtcYyZpw0gdhf4Tx/sl3MaEE671u3rkI+svmU12Y0RPIlZN8t2qb 6HjilKzUh1W6pmOA6QHOhLgLSipWNUelfSqLgVTYx6e2m6M2EAtAVSFetJFxvrd7v6le90 bYH8tJNHkxODPegUBVy3nxzza9it0+pYpZiavEVD8DgIeSvmGNH4LsldLzHkO30IW/xJxN 2EX8chdvweDzj0ngb9Wf6fAMXACtN9XXEhK+USm/zBOQOOWHxnVOI4BwjU+ONTWA== Received: by filterdrecv-589bfddbc7-swkbk with SMTP id filterdrecv-589bfddbc7-swkbk-1-661EA7BA-B5 2024-04-16 16:30:50.627136067 +0000 UTC m=+326325.820393094 Received: from MzczMzExMjU (unknown) by geopod-ismtpd-23 (SG) with HTTP id l3SdXMYaSYGBwNldJ9Um0A Tue, 16 Apr 2024 16:30:50.476 +0000 (UTC) Content-Type: multipart/alternative; boundary=cb15d53f7da2f5ad9082ac05c7f358b7ec1be0cce580c710ca57735b3961 Date: Tue, 16 Apr 2024 16:30:50 +0000 (UTC) From: Ryan Allis Mime-Version: 1.0 Message-ID: Subject: SaaS Unit Economics: A Deep Dive Reply-To: Ryan Allis Feedback-ID: automation_step:8a46fb20-5b78-45e0-ae38-2525b17867ca:cfa52acda08d1fe x-beehiiv-type: automation_step x-list-owner: List-Unsubscribe: =?us-ascii?Q?=3Cmailto=3A8a46fb20-5b78-45e0-ae38-2525b17867ca+1d17dc26-c1df-44e?= =?us-ascii?Q?0-812a-883b6ad5b6bc=40unsub=2Ebeehiiv=2Ecom=3E=2C?= =?us-ascii?Q?_=3Chttps=3A=2F=2Fsaasrise=2Ebeehiiv=2Ecom=2Fsubscribe=2F1d17dc26-c1df-44e0-812?= =?us-ascii?Q?a-883b6ad5b6bc=2Fmanage=3E?= x-newsletter-signup: https://saasrise.beehiiv.com/subscribe x-beehiiv-ids: =?us-ascii?Q?{=22account=5Fname=22=3A=22https=3A=2F=2Fsaasrise=2Ebeehiiv=2Ecom=2F=22=2C=22category=22=3A=22au?= =?us-ascii?Q?tomation=5Fstep=22=2C=22email=5Fgenerated=5Fat=22=3A171?= =?us-ascii?Q?3285050=2C=22user=5Fid=22=3A=228a46fb20-5b78-45e0-a?= =?us-ascii?Q?e38-2525b17867ca=22}?= sId: 8a46fb20-5b78-45e0-ae38-2525b17867ca x-list-id: 8a46fb20-5b78-45e0-ae38-2525b17867ca x-newsletter-id: https://saasrise.beehiiv.com/ X-SG-EID: =?us-ascii?Q?u001=2Esr+Zi4HchtZiAIrGLItAkqAJLamgo33aet=2FuqlkyaJPf=2Fx4cfuqMKIwYl?= =?us-ascii?Q?dAofkCR68C2a3749fFAiIGPJkwLFe5iyLvj+7Hs?= =?us-ascii?Q?ObjzNZaiUrvTWlxbp3i84ZGzq6pQzqthFy=2Fba7H?= =?us-ascii?Q?8Pmdis4i11DRJNG5TiCHP2vpoEUAWb7RNmk3yvL?= =?us-ascii?Q?VRRC+1DS1Jg6017EKh6DSeY2fNqzbjaExMnD9o7?= =?us-ascii?Q?wJsyGwqogxh1e12c7cD7ziDeAdZbb8JFSCISKnz?= =?us-ascii?Q?szh0?= X-SG-ID: =?us-ascii?Q?u001=2ESdBcvi+Evd=2FbQef8eZF3BpTL9BgbK5wfSJMJGMsmprBgbBeQK=2Fv=2FUCazh?= =?us-ascii?Q?m7BxiXYxRQcVBpzX1fbviKAjmB7VCabdQebW62l?= =?us-ascii?Q?NOhOZwoEKjS26Vr6hB=2FtsmnQnDZPOgCUPaiFyvm?= =?us-ascii?Q?yGZBM5hMqYZMceFh26e4YiecGU9oGU4MUxGK4dj?= =?us-ascii?Q?knibME10pgm67LJ0+LdjxLwadNiKnFryzAdeG1p?= =?us-ascii?Q?DoKYob=2F4OkQBfi0VBAsMM9jF9OjvZndiWQYqR5y?= =?us-ascii?Q?u6OlY+i0LRvR7Xhv30illG+lNtyy=2FOqZF2sZDZk?= =?us-ascii?Q?U9FdQVIe3tixZL2woG9VknRvx1Mu0ym9Tw=2FdtuQ?= =?us-ascii?Q?IePRiZB61zdpLv6KFc=2FMIn1m6P+P77h3vDwJ0GD?= =?us-ascii?Q?CZ2pzzRAf3wnykAAkX7JZw2nJwPZe1llFh8BZiH?= =?us-ascii?Q?s6SpSI1REkwPxcvFsHHzGJC2WyUDIgdBIKibSHa?= =?us-ascii?Q?Y?= To: "andrew@sterlingcal.com" X-Entity-ID: u001.sWV69YT6CipfOgvvxr5vQg== X-Spam-Status: No, score=0.4 X-Spam-Score: 4 X-Spam-Bar: / X-Spam-Flag: NO --cb15d53f7da2f5ad9082ac05c7f358b7ec1be0cce580c710ca57735b3961 Content-Transfer-Encoding: quoted-printable Content-Type: text/plain; charset=utf-8 Mime-Version: 1.0 View image: (https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuwRy= 6IuNhWBSU-OefUNG_54MFrp7oQZDQYoJZtF4HjyqrnkzkhEVCZ2wGoWyGWMYi-4YcGLiyKspRbo= 5767Fj5icyiktY2YoJwHTyFw2kifQxRpjxb_yGN_yjiYLlt8Dz8H9-FQx59mIV99E_1BaBq5Uaj= SMXkA6SOGmnOaYbzFpsJ1tUURCnSz85hV3BZQgf5apmEGl6NHoTofhUezCGEC63vxSfpLR2GxsM= XXFYWSDG2knMyrWAYKlEB-T8VhMUqjuhF-cnfQCTq1LuQakev6rs/45k/UJXPsX16Q9WwD_wRhB= hmOQ/t0/h001.jtWyml4fRNkqDYUiH3zhbvW8dXViwTTJY7sD0WIngNY Follow image link: (https://link.mail.beehiiv.com/ss/c/u001.d1Y1-FGtvkksf5D= -7I1gfdvb1VvSm5a8W0-LVmoN4MC4_xhCeo-nvJ2pa2x_2kyI/45k/UJXPsX16Q9WwD_wRhBhmO= Q/t1/h001.ie1gwUHVsymiV1fH3E1PJanYtzwh3CrOX7Mor4zXm98 Caption:=20 Welcome back to the [SaasRise](https://link.mail.beehiiv.com/ss/c/u001.UXwW= VAixgZ-oyJn_0myWAb91GdGyGVv9pdjG2DYlJp0/45k/UJXPsX16Q9WwD_wRhBhmOQ/t2/h001.= t5_0mAnKhTJdgOdNzFRlx3DxLpPb6h_kRuVa9p53d2k newsletter for growth-focused S= aaS CEOs and founders. This week, we=E2=80=99re doing a deep dive into** Sa= aS unit economics** (ARPU, Churn, Lifespan, LTV, CAC) and the optimal ratio= s for scaling up to $50M in ARR and beyond. Here=E2=80=99s this week=E2=80=99s featured article=E2=80=A6 View image: (https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuwRy= 6IuNhWBSU-OefUNG_54MFrp7oQZDQYoJZtF4HjyqrnkzkhEVCZ2wGoWyGWMYi-4YcGLiyKspRbo= 5767Fj5icyiktY2YoJwHTyFw2kifQxRpjxb_yGN_yjiYLlt8Dz8H8fHovFiGYVaEBpYdPeN2Nx2= 7YY39kll_aaV70T5kYr2DZFwkxKZf6FTgXxwDKnp2j7vUQvEh9ESa3XlGl0I5rXqezWIq0vHx_H= EWsF7wLGBYs3bMGVCxOKZ1J_4wq-rt7sTyw9Pa3DrCT7CT38F55Mx3VJh869T876B_Safc2pysh= 2WGv1kgbM_eWghaN9XZJtZiBdPf4O8SdjwbLA5w2Y1r18sSU0HwXaZ6GkG8wBCDX2IFl1LJ-z3S= hgeccftM3ysx-IcQbsegJEAE1yyQgc/45k/UJXPsX16Q9WwD_wRhBhmOQ/t3/h001.rvqjrTNIL= 0RQSLK0SD0iaXo3wCAyKR844X7r6p0RvWI Follow image link: (https://link.mail.beehiiv.com/ss/c/u001.d1Y1-FGtvkksf5D= -7I1gfdvb1VvSm5a8W0-LVmoN4MC4_xhCeo-nvJ2pa2x_2kyI/45k/UJXPsX16Q9WwD_wRhBhmO= Q/t4/h001.rLiAz2ezxj7s3LImH9tA8bcB_n_aDKWfl_z59Xx0hac Caption:=20 ## **SaaS Unit Economics: A Deep Dive for CEOs** By Ryan Allis, Former CEO & Co-Founder of iContact _**About this article:**__ This is a deep dive into rapid SaaS scaling via = absolutely nailing your unit economics. The author, Ryan Allis is the CEO o= f __[SaasRise](https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuw= R6n9dpoQ9_upye944z78YUTHVz1a5G9wxXPcXrM6y8ez/45k/UJXPsX16Q9WwD_wRhBhmOQ/t5/= h001.u218NUM9G62-SxSJr7oIwBO8DHpJiL5B7JvNX7Y4kbY the premier community SaaS= CEOs and Founders with $1M to $100M in ARR. He is a three-time INC 500 CEO= . He was previously CEO of iContact and grew the firm as founder/CEO to 70,= 000 customers, 1 million users, 300 employees, and $50M per year in sales b= efore exiting the firm for $169M. You can __[apply to join the SaasRise com= munity here](https://link.mail.beehiiv.com/ss/c/u001.UXwWVAixgZ-oyJn_0myWAb= Z4RM0sEIjq3CTHsgylB4BTCjrYiWv6oI7X88v8o_U3/45k/UJXPsX16Q9WwD_wRhBhmOQ/t6/h0= 01.TwYR8Z0KYQsbmBqpDed9CNuvUUK-Rs_GKG27g_tshMY View image: (https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuwRy= 6IuNhWBSU-OefUNG_54MFrp7oQZDQYoJZtF4HjyqrnkzkhEVCZ2wGoWyGWMYi-4YcGLiyKspRbo= 5767Fj5icyiktY2YoJwHTyFw2kifQxRpjxb_yGN_yjiYLlt8Dz8H6c8PQhTZD27Kul_eS17actA= 7BKEwvcY-bfEqJqReaL4sWAfxncHlasjIx_MybM-STRXto2HhoWNVZPGQQKtNea_pj6Eep5qwif= e_OSNzqDEvX9jMhYni8VdfKgnPogmyzlKqwAO19Heq03g3dfnQfnF-0zzp4hyknXCJv4Kyi0iTs= RAygrvsSNkhOhDKmm_yZrvKO6wonS2nUHjPEClsfCNvXKwzrlbvveQf27o7BSRJb8kw6Nmjxwhz= ThjETo4sgi9OWqAuARMofqaOCZKynI/45k/UJXPsX16Q9WwD_wRhBhmOQ/t7/h001.vSsm8xKOR= 2Tmay_vIe57UoOroGpk1pMKlUM0gtewl7k Caption: The iContact Team ten months before the company was acquired After ten years of building a company in trenches, I sold the SaaS business= I co-founded and led as CEO, iContact, for $169 million to a publicly trad= ed company. One of the biggest things I learned along the way was to pay very close att= ention to our **unit economics** =E2=80=93 and to follow a math-based syste= m for scaling up customer acquisition within our unit economic targets. I wrote this article as guide to **scaling up your SaaS firm by getting rea= lly good at calculating and understanding your own unit economics**. I hope= it=E2=80=99s helpful! ### **The Key SaaS Unit Economics** In any recurring revenue business, there are a few key unit economics which= help you understand the profitability of each individual customer. Let=E2= =80=99s begin with some definitions. 1. ARPU - Average Revenue Per User (or per customer) per month. Sometimes e= xpressed as MCV or Monthly Contract Value. 2. Account Churn - The monthly % of accounts that cancel 3. Revenue Churn - Revenue lost from canceled accounts plus revenue gained = from expanding existing accounts (from more seats, more usage, more feature= s, etc.) 4. Lifespan - The average # of months a customer stays a customer (estimate= by dividing 1/Monthly Account Churn Rate) 5. Lifetime Value - Total revenue across an average customer=E2=80=99s life= time (ARPU x Lifespan) 6. Customer Acquisition Cost - The average amount spent on sales and market= ing per new customer. View image: (https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuwRy= 6IuNhWBSU-OefUNG_54MFrp7oQZDQYoJZtF4HjyqrnkzkhEVCZ2wGoWyGWMYi-4YcGLiyKspRbo= 5767Fj5icyiktY2YoJwHTyFw2kifQxRpjxb_yGN_yjiYLlt8Dz8Hw-n229NEDwMId5azrrvBhvG= WqXUPIb1rzL-U13qU3VHFc0wLdFjF7WQGY2tQfw_Yd5jv2GIKuzAeV-wuKOVvBxA8Am3pEIVSLM= B_xojZghNm5-7dk20o18yszhbBUAjEA/45k/UJXPsX16Q9WwD_wRhBhmOQ/t8/h001.d3OhcteU= HuRksLRsUrtZaTHiGA5_RfG0taqlIsiluL8 Caption:=20 These five metrics allow you to know whether to invest more in sales and ma= rketing or invest less =E2=80=94 whether it=E2=80=99s time to go big =E2=80= =94 or go deeper with making your engine better first. =E2=9D=9D=20 =3D=3DThe biggest mistake SaaS CEOs make is not investing enough in growth = once they have achieved product/market fit. Generally speaking, if you=E2= =80=99re getting your upfront S&M costs paid back in less than a year of re= venue, as long as your account churn is low enough (let=E2=80=99s say under= 3.5% per month), it=E2=80=99s time to put more gas in the engine and put t= he pedal down =E2=80=93 and grow.=3D=3D - Ryan Allis, Founder of [SaasRise](https://link.mail.beehiiv.com/ss/c/u00= 1.UXwWVAixgZ-oyJn_0myWAb91GdGyGVv9pdjG2DYlJp0/45k/UJXPsX16Q9WwD_wRhBhmOQ/t9= /h001.Jx6kdxNUQaxYF3bw6SpQwr21T3fTlPVRVXpwtzZ4e3A **What were our actual numbers?** At iContact our ARPU was $59/mo, our acco= unt churn rate was 3.2% per month, our average customer lifespan was 32 mon= ths (1/0.032), our lifetime value (LTV) was $1860, and our CAC was $650. This meant our LTV:CAC ratio was a healthy 3x. It could have been much high= er, but our internal metric was to spend as much as we could in a channel a= s long as we were getting 3x LTV:CAC or better. While some early stage SaaS= VCs today are looking for ~6x LTV:CAC ratios, the reality is that after yo= u take their funding and invest it in growth, you=E2=80=99ll likely end up = closer to a 3-4x LTV:CAC ratio. At iContact we essentially built a system that traded $650 in upfront sales= and marketing costs for $1860 in revenue. We paid the Google, LinkedIn, Fa= cebook, G2, and our reseller partners an average of about $500 per new cust= omer, spent about $150 in sales comp costs to get them closed and signed = =E2=80=93 and there we had it =E2=80=93 a system that would generate 4,000 = new customers per month, over-and-over again! Throughout this process, we got very good at the process of customer acquis= ition and SaaS unit economics. We were essentially turning $1 in spend into= ~$3 in revenue (and $6 in added enterprise value), over and over and over = again. =E2=9D=9D=20 =3D=3DIn our final year before our exit to Vocus (now Cision), we added 216= ,000 new trial users, 36,000 new customers, and spent $20M on sales and mar= keting. We generated a total of $50M in sales that year and sold the compan= y for $169M. Our method of math-based scaling worked.=3D=3D - Ryan Allis, Founder of [SaasRise](https://link.mail.beehiiv.com/ss/c/u00= 1.UXwWVAixgZ-oyJn_0myWAb91GdGyGVv9pdjG2DYlJp0/45k/UJXPsX16Q9WwD_wRhBhmOQ/t1= 0/h001.hreP4uBekyjn58ZftOTpjHJTI_eqRy4W29NiUVG0Sqs At a high level, if your company=E2=80=99s account churn is under 3.5% per = month and your CAC is less than 1/3rd of your LTV, it=E2=80=99s time to sca= le up you sales and marketing efforts =E2=80=94 and grow faster. If your account churn is over roughly 3.5% per month, you=E2=80=99re in a y= ellow zone and it=E2=80=99s important to slow down and focus on product imp= rovement, account management, integrations, and stickiness before you scale= up your paid sales and marketing engines any further. You should always work on reducing churn =E2=80=94 it=E2=80=99s an ongoing = process. But once you get your customer life to be above 30 months (which h= appens at 3.5% monthly churn), it=E2=80=99s critical to begin rapidly scali= ng up the top of your funnel while you make continual improvements to the b= ottom of the leaky bucket of account churn. Time is of the essence in SaaS = scaling! ### **The Actual Unit Economics for Our Two Market Segments: SMB and Enterp= rise** At iContact, we built two different product offerings targeted at different= market segments: iContact and iContact Enterprise. Each of these products = had their own unique unit economics. iContact was targeted at small businesses who paid on average $36/mo (range= of $10/mo to $1000/mo) and iContact Enterprise was targeted at mid-sized b= usinesses and larger senders who paid an average of $1190 per month (range = of $800/mo to $50k/mo). It was essentially the same product with a couple a= dded features and access to a shared account manager. We marketed iContact via Google search ads, resellers, affiliates, online r= eview sites, SEO, postcards, and radio ads. We offered a 15 day free trial = and converted about 16% of our free trials into paying customers via an aut= omated email follow-up sequence. At the peak we were adding 18,000 new free trials per month. Later on, we s= witched to a freemium model (free for small accounts under 1000 subscribers= ), which initially performed worse, but after the network effect took place= it ended up performing better for us than a free trial. iContact Enterprise was marketed via similar channels =E2=80=93 with the on= ly difference being that prospects had to already have 50,000 subscribers o= n their email list (we asked at the time of trial signup) before we=E2=80= =99d invest the time/money to approach them with the Enterprise offering. I= f the prospect indicated they had that scale already, we=E2=80=99d have a s= ales development rep (SDR) call them to set up a demo. We also had SDRs rea= ch out to prospects via outbound email campaigns. Once our SDRs had validated that the client had the list size and the budge= t, they=E2=80=99d pass the opportunity to a Sales Executive to close the de= al. Once the account was closed, they=E2=80=99d be passed over to an Accoun= t Manager to manage and grow the client revenue. Land and expand. Because we knew our unit economics cold, we were able to get solid investme= nt term sheets from Bessemer, Updata, JMI Equity =E2=80=94 and our eventual= buyer. =E2=9D=9D=20 =3D=3DWe raised three rounds of venture capital to help us scale. Our seed = round was $500k from NC IDEA (when we had $1.5M ARR), our Series A was $7M = from Updata Partners (when we had $7M ARR), and our Series B was $40M from = JMI Equity (when we had $40M ARR). We were capital efficient, raising just = $32.5M to the balance sheet and $15M in secondary capital (buying out early= shareholders) in order to achieve a $169M exit.=3D=3D - Ryan Allis, Founder of [SaasRise](https://link.mail.beehiiv.com/ss/c/u00= 1.UXwWVAixgZ-oyJn_0myWAb91GdGyGVv9pdjG2DYlJp0/45k/UJXPsX16Q9WwD_wRhBhmOQ/t1= 1/h001.jCZqmVrw7pYTM-gP2wJ7MI_iq_o0U32Il-eqOl5wlaQ ### **The Actual Unit Economics at iContact** Let=E2=80=99s start with a recap of our numbers at iContact. At iContact, w= e had two parts of our business with two different unit economics and sales= approaches. At the time we sold the company, these were our approximate un= it economics. View image: (https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuwRy= 6IuNhWBSU-OefUNG_54MFrp7oQZDQYoJZtF4HjyqrnkzkhEVCZ2wGoWyGWMYi-4YcGLiyKspRbo= 5767Fj5icyiktY2YoJwHTyFw2kifQxRpjxb_yGN_yjiYLlt8Dz8H4ODDMaYPX5TzD0ijCWH4u3q= OloR75gnScRQ3f8CMEcAVRSH_sCqlXBmFVJvOBqrcSjDKe67BxH26QeHgJ8pbXyUuFMyXJP_g0Z= 74NkSBAGh_0hf2VzRDz79mCC7xqE-Tw/45k/UJXPsX16Q9WwD_wRhBhmOQ/t12/h001.6PyZnGP= SiPLLJvdF6mtTvd3lp6qGKaXPN0PwWimhULo Caption:=20 ### **Ideal Ranges for SaaS Unit Economics** Here are some target unit economic ranges you should aim for in your recurr= ing revenue SaaS company, noting that if your account churn is exceptionall= y low (<2% per month) you may be able to afford more than 14 months of reve= nue in upfront Sales & Marketing Costs and still build a strong firm. View image: (https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuwRy= 6IuNhWBSU-OefUNG_54MFrp7oQZDQYoJZtF4HjyqrnkzkhEVCZ2wGoWyGWMYi-4YcGLiyKspRbo= 5767Fj5icyiktY2YoJwHTyFw2kifQxRpjxb_yGN_yjiYLlt8Dz8H0ZVoUhAWGFEa8y7O0pm_Fp0= F1F3iP2X8OktDokos_rpukKOlSaysRkZevEL8lq-ocgylJQT3ucZ2hnshYW4IrpktE8_IWFw9n-= qcuR7MM-Lhd3H4EwjebjzWrMBpBq5Yg/45k/UJXPsX16Q9WwD_wRhBhmOQ/t13/h001.hV9DoY-= GndT-Rg9ga7aXRGqK9f3VwHzuJFnhMRKpiI0 Caption: Target Ranges for Ideal SaaS Unit Economics Generally speaking, SMB focused companies have higher churn rates than Ente= rprise focused companies (less upfront sales friction leads to less long te= rm commitment). An SMB focused business with 3% monthly account churn (and = 33 months of average customer lifespan) may only be able to invest 12 month= s upfront in S&M, while an Enterprise focused business with 1% monthly acco= unt churn (and 100 months of average customer lifespan) may be able to inve= st 24 months upfront in S&M. We=E2=80=99ll be back in touch next week with another article on rapid SaaS= scaling for SaaS CEOs. In the mean time, check out our SaaS CEO Mastermind= community, [SaasRise](https://link.mail.beehiiv.com/ss/c/u001.UXwWVAixgZ-o= yJn_0myWAd8vA1Wvqe3WhxBdae9dxCg/45k/UJXPsX16Q9WwD_wRhBhmOQ/t14/h001.Rvllusa= Y4JkRIo5aI-LuOz1nfVX3KnWYBzyDrY0ZuK8 View image: (https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuwRy= 6IuNhWBSU-OefUNG_54MFrp7oQZDQYoJZtF4HjyqrnkzkhEVCZ2wGoWyGWMYi-4YcGLiyKspRbo= 5767Fj5icyiktY2YoJwHTyFw2kifQxRpjxb_yGN_yjiYLlt8Dz8H_HafgSc0tNXFvOYWKKa-fAO= vBg27fNr7YUVspDh0UTOxsxrFAItBQdreJTkNZ5p9dgrRBM0agPsnY-zIpa4OCHKhdHVfqsVA-V= f2nlcnHs-LecGWlGAcO3PMJJgeAbQLw/45k/UJXPsX16Q9WwD_wRhBhmOQ/t15/h001.RA8iXht= RH89VBexG5nK6HAWA7ZZZT4LI5tayEySYspY Caption:=20 _For more how-to-scale-up support and content, __[apply to join Saa](https:= //link.mail.beehiiv.com/ss/c/u001.UXwWVAixgZ-oyJn_0myWATkXt8uCE-ULSnH-XzGiX= js/45k/UJXPsX16Q9WwD_wRhBhmOQ/t16/h001.Vvny7hATisEQHoZ0ahUnUWciowAoF5ImAk1h= ZP5Wr6g[sRise](https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuw= R6n9dpoQ9_upye944z78YUTHVz1a5G9wxXPcXrM6y8ez/45k/UJXPsX16Q9WwD_wRhBhmOQ/t17= /h001.ZrqmoCMJ1weRu-9g05J70GZfVdKpeTgywzN87wQjZ90 the premier mastermind co= mmunity for growth-focused SaaS CEOs_ ### _**About The Author**_ View image: (https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuwRy= 6IuNhWBSU-OefUNG_54MFrp7oQZDQYoJZtF4HjyqrnkzkhEVCZ2wGoWyGWMYi-4YcGLiyKspRbo= 5767Fj5icyiktY2YoJwHTyFw2kifQxRpjxb_yGN_yjiYLlt8Dz8H941G56Kt4kLzQPXSrAIyD6Q= na-pzVnrilKw5jGB0ORdptqQOtWoBoAKFDykowky1knQ1v0beUF3w9xYzPTVwn7aPpIeZZT2fXG= Nigb00kW3/45k/UJXPsX16Q9WwD_wRhBhmOQ/t18/h001.s_M8dCKhe8tPC9BelWc4FKP34kX-4= h5-WIpGwd2c40A Caption: Ryan Allis, Founder of SaasRise _Ryan Allis is the CEO of __[S](https://link.mail.beehiiv.com/ss/c/u001.d1Y= 1-FGtvkksf5D-7I1gfdvb1VvSm5a8W0-LVmoN4MBwX0A7WrBq1hTtDJYo5Nfz/45k/UJXPsX16Q= 9WwD_wRhBhmOQ/t19/h001.5EyX4tsGLtuYOgGoc5mhcGbfu7SwREWbjtl2DNMlTow[aasRise]= (https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuwRzA0t_5eScHdzF= d21xBwIuhHE5fVdXrNQFo6XHeISWoC/45k/UJXPsX16Q9WwD_wRhBhmOQ/t20/h001.rYheypCh= kZduu1QQy_UFNDXiZBFkZ5UejaILUiGpPCY the premier mastermind community for gr= owth-focused SaaS CEOs. He is a three time INC 500 CEO. He was previously C= EO of iContact and grew the firm as founder/CEO to 70,000 customers, 1 mill= ion users, 300 employees, $50M per year in sales, and an exit for $169M to = Vocus (NASDAQ:VOCS). Since the sale of iContact, Ryan has been the CEO coac= h to high-growth SaaS firms including Tatango, Seamless.ai, Pipeline, Datal= yse, Green Packet, Revenue Accelerator, Clearstream, YouCanBookMe, Retreave= r, and EventMobi. Ryan has been part of the EO, Summit Series, and Burning = Man communities, and is the founder of Hive.org, a global community for pur= pose-driven leaders. He holds an MBA from Harvard Business School, where he= was Co-President of the Social Enterprise Club and a member of the Harvard= Graduate School Leadership Institute._ ## _**Four Helpful Free SaaS Growth Resources**_ View image: (https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuwRy= 6IuNhWBSU-OefUNG_54MFrp7oQZDQYoJZtF4HjyqrnkzkhEVCZ2wGoWyGWMYi-4YcGLiyKspRbo= 5767Fj5icyiktY2YoJwHTyFw2kifQxRpjxb_yGN_yjiYLlt8Dz8H-EF9PlKiefvmhUPN5TOk0tp= H__LhkvWmUnSzauw4liEvfXw-caA54wzDZBhhAv8CcSvjoOr0WKAoaCdkRDK1dALU0c33ggKrC4= wLSepJ0VJ5St956YlVAwikNnFzahweQ/45k/UJXPsX16Q9WwD_wRhBhmOQ/t21/h001.qMw6Pm7= eUk6tgjbfxraocbmqTKncddM7DrZQLWz0QuM Follow image link: (https://link.mail.beehiiv.com/ss/c/u001.FFZtJeQpwndDgTR= pDqFJvL779viTrGYjpt97inVIgiLZQ9g5u9k_oAiPWOltrAVKz8lrf5_2AbliwgEUynxC4Nt37d= bRcTclkgnRfDX9TA2W9M76YrVs82D113oFF8FGqJoreFciBTJAk71RglvMXDIf4Lfm_yihhW-s3= QyaoJFkrSFIrCfoewtt9-FE1eSf5g1pyMaYUh1a93EeTIAgoA/45k/UJXPsX16Q9WwD_wRhBhmO= Q/t22/h001.nQnID1VxWdm1JnBcexADqRHMbkcVaU92U8t5DcierK8 Caption:=20 _The most in-depth guide for scaling up SaaS companies from $0 to $50M in A= RR. Including over 1,200 slides on every aspect of SaaS scaling._ Download Now (https://link.mail.beehiiv.com/ss/c/u001.FFZtJeQpwndDgTRpDqFJv= L779viTrGYjpt97inVIgiLZQ9g5u9k_oAiPWOltrAVKz8lrf5_2AbliwgEUynxC4Nt37dbRcTcl= kgnRfDX9TA2W9M76YrVs82D113oFF8FGqJoreFciBTJAk71RglvMXDIf4Lfm_yihhW-s3QyaoJF= krSFIrCfoewtt9-FE1eSf5g1pyMaYUh1a93EeTIAgoA/45k/UJXPsX16Q9WwD_wRhBhmOQ/t23/= h001.CFbbJw10ihJK2Kv7okWmyXXYElnT7PWN1S6c6vVExT4 View image: (https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuwRy= 6IuNhWBSU-OefUNG_54MFrp7oQZDQYoJZtF4HjyqrnkzkhEVCZ2wGoWyGWMYi-4YcGLiyKspRbo= 5767Fj5icyiktY2YoJwHTyFw2kifQxRpjxb_yGN_yjiYLlt8Dz8H9A9Z0XnMea_X_7BZ1qLDKob= MyttY2rEFMtvD57m2ULwfW8cxN7hIfRrzgpFWRwsqSlaawlZ976WUe5Mwpt4IYK3g1Dyza1AtMx= fNlzIF6mj/45k/UJXPsX16Q9WwD_wRhBhmOQ/t24/h001.7GJ7WcXNAZ58dWvYv0ONieV7m8Z72= z7Bph-9NSBSfZ0 Follow image link: (https://link.mail.beehiiv.com/ss/c/u001.FFZtJeQpwndDgTR= pDqFJvL779viTrGYjpt97inVIgiIDJrRVO8S3oMVsYXBWqIg75lkbo8v8yKHpH7O41A8lNDKsPw= YqqfvvrPBvHVN4zzrCc_O53I5wdKiktn_r4BFodLEqwkx2YuhNOOd3Gqq8Jg4g3JOkt2gm4J550= gh6MUG4u6QJpfLl63yRNcbrrQCDJSm9gYNWJnzfM2DAMO_2XA/45k/UJXPsX16Q9WwD_wRhBhmO= Q/t25/h001.IY3dDWYNOTi4MYWDtGK43jyd0S5qRY5thI5BgdX2g-Y Caption:=20 _A fourteen page in-depth PDF on we take each CEO client through a six-phas= e process designed to increase lead volume, customer acquisition, and reven= ue growth =E2=80=94 and then scale up the sales team, executive team, and i= nvestor support as we help you prepare for future fundraising rounds (if ne= eded) or an exit (if desired)._ Download Now (https://link.mail.beehiiv.com/ss/c/u001.FFZtJeQpwndDgTRpDqFJv= L779viTrGYjpt97inVIgiIDJrRVO8S3oMVsYXBWqIg75lkbo8v8yKHpH7O41A8lNDKsPwYqqfvv= rPBvHVN4zzrCc_O53I5wdKiktn_r4BFodLEqwkx2YuhNOOd3Gqq8Jg4g3JOkt2gm4J550gh6MUG= 4u6QJpfLl63yRNcbrrQCDJSm9gYNWJnzfM2DAMO_2XA/45k/UJXPsX16Q9WwD_wRhBhmOQ/t26/= h001.o9KPJj5kqM41FS75MosQceQCca2-4Z1mzz99L5gqUPw View image: (https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuwRy= 6IuNhWBSU-OefUNG_54MFrp7oQZDQYoJZtF4HjyqrnkzkhEVCZ2wGoWyGWMYi-4YcGLiyKspRbo= 5767Fj5icyiktY2YoJwHTyFw2kifQxRpjxb_yGN_yjiYLlt8Dz8H5a5KI8cJD76KPbyQP-A7tq8= HobWQChQt8pDFVckGbbWGcXKtipfMRQH9KM5xUByfltm5YoOFsgakp8Ey5VQmJvov2gzghCpCaE= 1mkXR3USqL2WQP6bTnweL2eS5f-VrGw/45k/UJXPsX16Q9WwD_wRhBhmOQ/t27/h001.3_cLT2y= WcIZ2ipppSdMN2-O_JUUAuHo1rhZNi2FrZbc Follow image link: (https://link.mail.beehiiv.com/ss/c/u001.FFZtJeQpwndDgTR= pDqFJvL779viTrGYjpt97inVIgiLtj-0TmrDHvi4By4wwZDzynUKOzSmBOxMVozZX5wlRYjNxiH= cjVpevmgevwivrDFI5NS2e_QSI2d0PsAUd3sy9lrIjy6S6o7x8OTSmIHQrxy3uzmpefAKAItr_S= Mwa4mEe6Mdx42PlYDCnm1YJ5et1kDP7mRus-bFeHqYqq8XRwA/45k/UJXPsX16Q9WwD_wRhBhmO= Q/t28/h001.r0DuUFKMD-pngUuix4QUNYwG3xKGYcWaMNa_JoN8sg4 Caption:=20 _A twenty page in-depth PDF on how to scale a B2B SaaS Company from $1M to = $50M ARR. Covering CAC-based customer acquisition, sales team scaling, vent= ure capital markets, and preparing for the exit._ Download Now (https://link.mail.beehiiv.com/ss/c/u001.FFZtJeQpwndDgTRpDqFJv= L779viTrGYjpt97inVIgiLtj-0TmrDHvi4By4wwZDzynUKOzSmBOxMVozZX5wlRYjNxiHcjVpev= mgevwivrDFI5NS2e_QSI2d0PsAUd3sy9lrIjy6S6o7x8OTSmIHQrxy3uzmpefAKAItr_SMwa4mE= e6Mdx42PlYDCnm1YJ5et1kDP7mRus-bFeHqYqq8XRwA/45k/UJXPsX16Q9WwD_wRhBhmOQ/t29/= h001.oW1JdgA0kMM-quEG6BEzx6zkCVMLUMZzSNT8QMwvNcc View image: (https://link.mail.beehiiv.com/ss/c/u001.iONMcImK8a-Nu11tvHuwRy= 6IuNhWBSU-OefUNG_54MFrp7oQZDQYoJZtF4HjyqrnkzkhEVCZ2wGoWyGWMYi-4YcGLiyKspRbo= 5767Fj5icyiktY2YoJwHTyFw2kifQxRpjxb_yGN_yjiYLlt8Dz8Hy5uGDAudynuISd7Bdsh8Xob= TOXjN4sAb0VXxDnhIbNfITq-g1K3MajDaT8t6RxLsr2qZMZactc8HQg62pWSw5s/45k/UJXPsX1= 6Q9WwD_wRhBhmOQ/t30/h001.GcMZlZVQQVxd8at7Iqsw4EaZ6Sz5amiFsvSxqQ-9gA4 Follow image link: (https://link.mail.beehiiv.com/ss/c/u001.FFZtJeQpwndDgTR= pDqFJvL779viTrGYjpt97inVIgiIGkl0zMnx4ciEDFzUmYwbbuv1AHrKTSm-0yY4e9fU4h84KeJ= EYvXI40kKkt2aT8uxveKDzoP1WJwbS97bMzWD3XB4oUEaFlHp5edjNlxMzmJHSTOmRPlgM0aH6q= iTJQL3B2CJlXHtjcHsxMvruQhJslBQDsfMhv9ZLmoP8lKenUA/45k/UJXPsX16Q9WwD_wRhBhmO= Q/t31/h001.SopTF5lNzU8UIwfVDG8SOy8XaPghludEIm1YzdUdqDs Caption:=20 _The SaaS Growth Formula was written to help SaaS CEOs who are focused on g= rowing their company's sales - by implementing a simple formula called The = Growth Formula. This formula is for companies that have already established= product/market fit, already have paying customers, and are now ready to sc= ale up through scientific and CAC-based digital marketing, inbound sales, a= nd outbound sales._ Download Now (https://link.mail.beehiiv.com/ss/c/u001.FFZtJeQpwndDgTRpDqFJv= L779viTrGYjpt97inVIgiIGkl0zMnx4ciEDFzUmYwbbuv1AHrKTSm-0yY4e9fU4h84KeJEYvXI4= 0kKkt2aT8uxveKDzoP1WJwbS97bMzWD3XB4oUEaFlHp5edjNlxMzmJHSTOmRPlgM0aH6qiTJQL3= B2CJlXHtjcHsxMvruQhJslBQDsfMhv9ZLmoP8lKenUA/45k/UJXPsX16Q9WwD_wRhBhmOQ/t32/= h001.Mnq4Sfc1DM9S4ulusxMI4drqi3gqlebCxYyfPs2D_SM _We=E2=80=99ll see you next week with more great SaaS growth and scaling co= ntent!_ --cb15d53f7da2f5ad9082ac05c7f358b7ec1be0cce580c710ca57735b3961 Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset=utf-8 Mime-Version: 1.0 <= meta name=3D"supported-color-schemes" content=3D"light"/>SaaS Unit E= conomics: A Deep DiveSaaS Unit Economics: A Deep Dive=
The newsletter for grow= th-focused SaaS CEOs and founders  ‌ ‌ ‌&#= 160;‌ ‌ ‌ ‌ ‌ ‌= ; ‌ ‌ ‌ ‌ ‌ = 204; ‌ ‌ ‌ ‌ ‌ = ‌ ‌ ‌ ‌ ‌ ‌= 60;‌ ‌ ‌ ‌ ‌ ‌=  ‌ ‌ ‌ ‌ ‌ R= 04; ‌ ‌ ‌ ‌ ‌ &= #8204; ‌ ‌ ‌ ‌ ‌= 0;‌ ‌ ‌ ‌ ‌ ‌&= #160;‌ ‌ ‌ ‌ ‌ ̴= 4; ‌ ‌ ‌ ‌ ‌ &#= 8204; ‌ ‌ ‌ ‌ ‌ = ;‌ ‌ ‌ ‌ ‌ ‌&#= 160;‌ ‌ ‌ ‌ ‌ ‌= ; ‌ ‌ ‌ ‌ ‌ = 204; ‌ ‌ ‌ ‌ ‌ = ‌ ‌ ‌ ‌ ‌ ‌= 60;‌ ‌ ‌ ‌ ‌ ‌=  ‌ ‌ ‌ ‌ ‌ R= 04; ‌ ‌ ‌ ‌ ‌ &= #8204; ‌ ‌ ‌ ‌ ‌= 0;‌ ‌ ‌ ‌ ‌ ‌&= #160;‌ ‌ ‌ ‌ ‌ ̴= 4; ‌ ‌ ‌ ‌ ‌ &#= 8204; ‌ ‌ ‌ ‌ ‌ = ;‌ ‌ ‌ ‌ ‌ ‌&#= 160;‌ ‌ ‌ ‌ ‌ ‌= ; ‌ ‌ ‌ ‌ ‌ = 204; ‌ ‌ ‌ ‌ ‌ = ‌ ‌ ‌ ‌ ‌ ‌= 60;‌ ‌ ‌ ‌ ‌ ‌=  ‌ ‌ ‌ ‌ ‌ R= 04; ‌ ‌ ‌ ‌ ‌ &= #8204; ‌ ‌ ‌ ‌ ‌= 0;‌
3D""
=

Welcome back to the SaasRise newsl= etter for growth-focused SaaS CEOs and founders. This week, we=E2=80=99re d= oing a deep dive into SaaS unit economics (ARPU, Churn, Lifespan, LT= V, CAC) and the optimal ratios for scaling up to $50M in ARR and beyond.

<= tr>= = =
3D""

Here=E2=80=99s this week=E2=80= =99s featured article=E2=80=A6

<= a href=3D"https://link.mail.beehiiv.com/ss/c/u001.d1Y1-FGtvkksf5D-7I1gfWkGw= 11k4H7s6J5NJaZfZSc5a6QmDzeenvyygyHkslhv-FeSShxxbjkdZcfHrqXP0p8VBMN8M-2kztQH= 8wEPHqfSwdbnbTFfBEBc3-smYa8Fav7NPlySygkWhfRMUO3V3jhYUZ13XEe6Rt6F3yPaTfEh18Y= XmYJnUWS8kGFECqir/45k/UJXPsX16Q9WwD_wRhBhmOQ/h35/h001.xnC6VB6H_xE14O_9fNlxN= Szvq7A-kS2X3IVAHn5Mqbk" rel=3D"noopener noreferrer nofollow" style=3D"text-= decoration:none;" target=3D"_blank">3D""

SaaS Unit Economics: A Deep Dive for CEOs
By Rya= n Allis, Former CEO & Co-Founder of iContact

About this article: This is a deep dive into= rapid SaaS scaling via absolutely nailing your unit economics. The author,= Ryan Allis is the CEO of SaasRise, the pre= mier community SaaS CEOs and Founders with $1M to $100M in ARR. He is a thr= ee-time INC 500 CEO. He was previously CEO of iContact and grew the firm as= founder/CEO to 70,000 customers, 1 million users, 300 employees, and $50M = per year in sales before exiting the firm for $169M. You can ap= ply to join the SaasRise community here.

3D""<= /td>

The iContact Team ten months before the company was acquired

After ten years= of building a company in trenches, I sold the SaaS business I co-founded a= nd led as CEO, iContact, for $169 million to a publicly traded company.

One of the biggest things I learn= ed along the way was to pay very close attention to our unit economics =E2=80=93 and to follow a math-based system for scaling up customer acqu= isition within our unit economic targets.

I wrote this article as guide to scaling up your SaaS firm b= y getting really good at calculating and understanding your own unit econom= ics. I hope it=E2=80=99s helpful!

The Key SaaS Unit Economics

In any recurring revenue business= , there are a few key unit economics which help you understand the profitab= ility of each individual customer. Let=E2=80=99s begin with some definition= s.

  1. ARPU - Av= erage Revenue Per User (or per customer) per month. Sometimes expressed as = MCV or Monthly Contract Value.

  2. Account Churn -= The monthly % of accounts that cancel

  3. Revenue= Churn - Revenue lost from canceled accounts plus revenue gained from expan= ding existing accounts (from more seats, more usage, more features, etc.) <= /p>

  4. Lifespan - The average # of months a customer s= tays a customer (estimate by dividing 1/Monthly Account Churn Rate)

  5. Lifetime Value - Total revenue across an average cust= omer=E2=80=99s lifetime (ARPU x Lifespan)

  6. Cust= omer Acquisition Cost - The average amount spent on sales and marketing per= new customer.

<= img src=3D"https://media.beehiiv.com/cdn-cgi/image/fit=3Dscale-down,format= =3Dauto,onerror=3Dredirect,quality=3D80/uploads/asset/file/91b51489-fe6d-4f= 3c-9995-7a36408a9924/Screen_Shot_2023-09-13_at_4.56.07_PM.png" alt=3D"" hei= ght=3D"auto" width=3D"630" style=3D"display:block;width:100%;" border=3D"0"= />

These five met= rics allow you to know whether to invest more in sales and marketing or inv= est less =E2=80=94 whether it=E2=80=99s time to go big =E2=80=94 or go deep= er with making your engine better first.

=E2=9D=9D

The biggest mistake SaaS= CEOs make is not investing enough in growth once they have achieved produc= t/market fit. Generally speaking, if you=E2=80=99re getting your upfront S&= M costs paid back in less than a year of revenue, as long as your account c= hurn is low enough (let=E2=80=99s say under 3.5% per month), it=E2=80=99s t= ime to put more gas in the engine and put the pedal down =E2=80=93 and grow= .

- Ryan Allis, Foun= der of SaasRise

= What were our actual numbers? At iContact our ARPU was $59/mo, our a= ccount churn rate was 3.2% per month, our average customer lifespan was 32 = months (1/0.032), our lifetime value (LTV) was $1860, and our CAC was $650.=

This meant our LTV:CAC ratio = was a healthy 3x. It could have been much higher, but our internal metric w= as to spend as much as we could in a channel as long as we were getting 3x = LTV:CAC or better. While some early stage SaaS VCs today are looking for ~6= x LTV:CAC ratios, the reality is that after you take their funding and inve= st it in growth, you=E2=80=99ll likely end up closer to a 3-4x LTV:CAC rati= o.

At iContact we essentially = built a system that traded $650 in upfront sales and marketing costs for $1= 860 in revenue. We paid the Google, LinkedIn, Facebook, G2, and our reselle= r partners an average of about $500 per new customer, spent about $150 in s= ales comp costs to get them closed and signed =E2=80=93 and there we had it= =E2=80=93 a system that would generate 4,000 new customers per month, over= -and-over again!

Throughout th= is process, we got very good at the process of customer acquisition and Saa= S unit economics. We were essentially turning $1 in spend into ~$3 in reven= ue (and $6 in added enterprise value), over and over and over again.

=E2=9D=9D

In our final year before our exit to Vocus (now Cision), we added 216,0= 00 new trial users, 36,000 new customers, and spent $20M on sales and marke= ting. We generated a total of $50M in sales that year and sold the company = for $169M. Our method of math-based scaling worked.

- Ryan Allis, Founder of SaasRise

At a high level, if your= company=E2=80=99s account churn is under 3.5% per month and your CAC is le= ss than 1/3rd of your LTV, it=E2=80=99s time to scale up you sales and mark= eting efforts =E2=80=94 and grow faster.

If your account churn is over roughly 3.5% per month, you=E2=80= =99re in a yellow zone and it=E2=80=99s important to slow down and focus on= product improvement, account management, integrations, and stickiness befo= re you scale up your paid sales and marketing engines any further.

You should always work on reducing chu= rn =E2=80=94 it=E2=80=99s an ongoing process. But once you get your custome= r life to be above 30 months (which happens at 3.5% monthly churn), it=E2= =80=99s critical to begin rapidly scaling up the top of your funnel while y= ou make continual improvements to the bottom of the leaky bucket of account= churn. Time is of the essence in SaaS scaling!

The Actual Unit Ec= onomics for Our Two Market Segments: SMB and Enterprise

At iContact, we built two different product o= fferings targeted at different market segments: iContact and iContact Enter= prise. Each of these products had their own unique unit economics.

iContact was targeted at small busines= ses who paid on average $36/mo (range of $10/mo to $1000/mo) and iContact E= nterprise was targeted at mid-sized businesses and larger senders who paid = an average of $1190 per month (range of $800/mo to $50k/mo). It was essenti= ally the same product with a couple added features and access to a shared a= ccount manager.

We marketed iC= ontact via Google search ads, resellers, affiliates, online review sites, S= EO, postcards, and radio ads. We offered a 15 day free trial and converted = about 16% of our free trials into paying customers via an automated email f= ollow-up sequence.

At the pea= k we were adding 18,000 new free trials per month. Later on, we switched to= a freemium model (free for small accounts under 1000 subscribers), which i= nitially performed worse, but after the network effect took place it ended = up performing better for us than a free trial.

iContact Enterprise was marketed via similar channels =E2= =80=93 with the only difference being that prospects had to already have 50= ,000 subscribers on their email list (we asked at the time of trial signup)= before we=E2=80=99d invest the time/money to approach them with the Enterp= rise offering. If the prospect indicated they had that scale already, we=E2= =80=99d have a sales development rep (SDR) call them to set up a demo. We a= lso had SDRs reach out to prospects via outbound email campaigns.

Once our SDRs had validated that the cl= ient had the list size and the budget, they=E2=80=99d pass the opportunity = to a Sales Executive to close the deal. Once the account was closed, they= =E2=80=99d be passed over to an Account Manager to manage and grow the clie= nt revenue. Land and expand.

B= ecause we knew our unit economics cold, we were able to get solid investmen= t term sheets from Bessemer, Updata, JMI Equity =E2=80=94 and our eventual = buyer.

=E2=9D=9D

We raised three rounds of venture capital to help us scale= . Our seed round was $500k from NC IDEA (when we had $1.5M ARR), our Series= A was $7M from Updata Partners (when we had $7M ARR), and our Series B was= $40M from JMI Equity (when we had $40M ARR). We were capital efficient, ra= ising just $32.5M to the balance sheet and $15M in secondary capital (buyin= g out early shareholders) in order to achieve a $169M exit.

- Ryan Allis, Founder of Saa= sRise

The Actual Unit Economics at iContact

Let=E2=80=99s start with a recap of ou= r numbers at iContact. At iContact, we had two parts of our business with t= wo different unit economics and sales approaches. At the time we sold the c= ompany, these were our approximate unit economics.

3D""

Ideal Ranges for SaaS Unit Ec= onomics

Here are some targ= et unit economic ranges you should aim for in your recurring revenue SaaS c= ompany, noting that if your account churn is exceptionally low (<2% per = month) you may be able to afford more than 14 months of revenue in upfront = Sales & Marketing Costs and still build a strong firm.

3D""

Target Ranges for Ideal SaaS Unit Eco= nomics

Genera= lly speaking, SMB focused companies have higher churn rates than Enterprise= focused companies (less upfront sales friction leads to less long term com= mitment). An SMB focused business with 3% monthly account churn (and 33 mon= ths of average customer lifespan) may only be able to invest 12 months upfr= ont in S&M, while an Enterprise focused business with 1% monthly account ch= urn (and 100 months of average customer lifespan) may be able to invest 24 = months upfront in S&M.

We=E2= =80=99ll be back in touch next week with another article on rapid SaaS scal= ing for SaaS CEOs. In the mean time, check out our SaaS CEO Mastermind comm= unity, SaasRise.

3D""<= /td>

For more how-to= -scale-up support and content, sRise, the premier mastermind communit= y for growth-focused SaaS CEOs

About The Author

3D""=

Ryan Allis, Founder of SaasRise

<= /td>

Ryan Allis is the CEO of SaasRise, the premier mastermind community for grow= th-focused SaaS CEOs. He is a three time INC 500 CEO. He was previously CEO= of iContact and grew the firm as founder/CEO to 70,000 customers, 1 millio= n users, 300 employees, $50M per year in sales, and an exit for $169M to Vo= cus (NASDAQ:VOCS). Since the sale of iContact, Ryan has been the CEO coach = to high-growth SaaS firms including Tatango, Seamless.ai, Pipeline, Datalys= e, Green Packet, Revenue Accelerator, Clearstream, YouCanBookMe, Retreaver,= and EventMobi. Ryan has been part of the EO, Summit Series, and Burning Ma= n communities, and is the founder of Hive.org, a global community for purpo= se-driven leaders. He holds an MBA from Harvard Business School, where he w= as Co-President of the Social Enterprise Club and a member of the Harvard G= raduate School Leadership Institute.

Four Helpful Free SaaS = Growth Resources

= =
3D""

The most in-depth guide for sc= aling up SaaS companies from $0 to $50M in ARR. Including over 1,200 slides= on every aspect of SaaS scaling.

= Download Now
<= a href=3D"https://link.mail.beehiiv.com/ss/c/u001.FFZtJeQpwndDgTRpDqFJvL779= viTrGYjpt97inVIgiIDJrRVO8S3oMVsYXBWqIg75lkbo8v8yKHpH7O41A8lNDKsPwYqqfvvrPBv= HVN4zzrCc_O53I5wdKiktn_r4BFodLEqwkx2YuhNOOd3Gqq8Jg4g3JOkt2gm4J550gh6MUG4u6Q= JpfLl63yRNcbrrQCD4HJ8xNdGsBXdMbnEAOlCOw/45k/UJXPsX16Q9WwD_wRhBhmOQ/h48/h001= .rt6adh1O9WV5nhvZiZ2GfevcTqY_SIQDX6Acp11LINI" rel=3D"noopener noreferrer no= follow" style=3D"text-decoration:none;" target=3D"_blank">3D""

A fourteen page in-depth PDF on we take = each CEO client through a six-phase process designed to increase lead volum= e, customer acquisition, and revenue growth =E2=80=94 and then scale up the= sales team, executive team, and investor support as we help you prepare fo= r future fundraising rounds (if needed) or an exit (if desired).

Download Now
3D""

A twenty page in-depth PDF on how to scale a B2B SaaS Company f= rom $1M to $50M ARR. Covering CAC-based customer acquisition, sales team sc= aling, venture capital markets, and preparing for the exit.

Download Now
<= /table>
3D""

The SaaS Growth Formula w= as written to help SaaS CEOs who are focused on growing their company's= sales - by implementing a simple formula called The Growth Formula. This f= ormula is for companies that have already established product/market fit, a= lready have paying customers, and are now ready to scale up through scienti= fic and CAC-based digital marketing, inbound sales, and outbound sales.=

Download Now

We=E2=80=99ll see you next week wi= th more great SaaS growth and scaling content!

=
 

Update your ema= il preferences or unsubscribe here

© 2024 SaasRise

Outpost Guiones
Nosara, Guanacaste 50206= , Costa Rica

=
Powered by beehiiv
--cb15d53f7da2f5ad9082ac05c7f358b7ec1be0cce580c710ca57735b3961--