Research Shows What Best-in-Class SaaS Growth Looks Like

How does your business growth compare to your software as a service peers? To help technology executives answer this question we captured company growth data as part of The Business Growth Report.

We then grouped the data to rank survey respondents into three performance-based archetypes of Best-in-Class (the top 15%), Medians (the middle 50%) and Laggards (the lower 35%.)

So, consider the below data findings to understand what Best-in-Class SaaS growth looks like.

ARR Growth

The research found that the average ARR growth rate was 39 percent. However, the data also demonstrated that ARR varied significantly by company size.

So, to put this figure into a more meaningful perspective, the below clustered column chart shows ARR increases by similarly sized companies.

SaaS Growth Rates

Among the smallest cohort of $1 to $10M companies, the Best in Class archetype achieved an average ARR increase of 72.7 percent. That was 104 percent higher than the combined average of the Laggards and Medians.

For the middle cohort of $10 to $20M companies, the Best in Class companies achieved an average ARR increase of 62 percent. That was 101 percent higher than their Median and Laggard peers.

For the $20M and higher companies, the Best in Class archetype achieved an average ARR increase of 43 percent. That was an impressive 119 percent higher than the combined average of Laggards and Medians.

For each company size, the Best in Class archetype demonstrated significantly higher business growth than their lower performing peers.

How to Achieve Best-in-Class SaaS Growth

Now you know what Best-in-Class company growth looks like. The next question may be how to achieve that level of performance to grow your SaaS company.

The research answered that question by analyzing data that measured corporate strategies, operational processes and technology effectiveness. That analysis identified what the Best in Class leaders do differently than their lower performing peers.

Nine initiatives stood out. These 9 growth programs are referred to as evidence-based best practices and generally organized into a SaaS growth strategy. They are shown below.

1

Growth Strategy

Don't confuse your annual sales plan with your SaaS growth strategy. The latter is singularly focused on the actions that drive revenue improvements. It defines the roadmap to achieve targeted revenue improvements in the shortest time and least cost.

2

RevOps

Only 19% of respondents had a centralized group with enterprise-wide revenue accountability. However, 88% of that small cohort was made up of the Best in Class archetype. This inverse relationship reveals that almost 9 out of 10 of the highest growth companies manage revenue accountability differently than all others. Also, 76% of this cohort use Revenue Operations (RevOps) as their centralized revenue management program.

3

Technology

The data found that many publishers resembled the shoe cobbler's children when it came to internal technologies that boost performance. But not the top performers. They used more technologies, including marketing tools such as online intent signals, sales tools such as Configure-Price-Quote (CPQ), and operational tools such telemetry and IoT.

However, the biggest technology-related disparity among performance archetypes was the effectiveness of their AI program. The leaders ranked AI effectiveness 44% higher than the combined average of the Median and Laggard cohorts.

4

Innovation

The average innovation investment among all respondents was 9 to 15%. However, the average for the top performing companies was 16 to 24%. The data also showed a difference in how the innovation budget was allocated.

The top performers invested about 44% of their budget into transformative innovation. That was different than the lower performers who allocated the bulk of their innovation budget toward incremental improvements and upgrades of existing products.

5

Company Culture

Survey respondents that cited an active and measured corporate culture achieved an average of 38% higher revenue growth than those who did not. These companies recognize that company culture directly impacts employee engagement and productivity.

6

Customer Affinity

A majority of the top technology growth companies applied a specific customer strategy to build customer affinity. They also measured the ROI of their program. The majority of lower performers did not. Delivering customer experiences and growing customer relationships are particularly influential in increasing customer lifetime value and decreasing customer churn.

7

Customer Retention

Top performers used advanced retention techniques such as an early warning system to detect customers at risk of attrition. They also used analytics tools that went a step further to identify the root causes and top reasons for customer churn.

8

Performance Analytics

The majority of top performers cited more advanced business intelligence tools and used predictive analytics about 3 times more frequently than their lower performing peers.

9

Strategic Alliances

93 percent of the top performers actively use alliances as part of their business development strategy. That was an overwhelming majority and 39 percent higher than their Median and Laggard peers.

Company Growth by the Numbers

Successfully replicating any one of the above best practices will deliver an incremental uplift. That may be sufficient for some technology executives.

But others may seek more significant company growth. That requires a more holistic approach, which can be achieved by replicating a mix of the evidence-based best practices.

The research was conclusive in showing the technology leaders excelled in at least five, and on average, seven or more of the nine best practices.

SaaS Growth Best Practices

The More You Know the Faster You Grow

Most technology companies apply cost of sale and SG&A expense benchmarks to ensure their costs are managed. However, most do not apply revenue and growth benchmarks. Mostly because they don't have them. Now you do.

Software as a Service business expansion recommendations without supporting data are just opinions. The 9 evidence-based best practices herein are born from field research and show what the highest growth software companies do differently than their peers.

When you start with these findings, learn from industry peers that have achieved the greatest success and apply their methods to repeat that performance, you eliminate guesswork and pursue the straightest and shortest route to targeted outcomes.

One more thing.

Most respondents suggested they adopted all or most of the 9 best practices. However, survey questions that drilled in to operational processes suggested otherwise. There is a big difference between adoption which is often a casual participation and dedication which creates expertise.

Dedication requires focused programs with executive sponsorship, budgeted resources, supporting technology, performance analytics and continuous process improvements. Dedication advances from being a generalist to becoming a specialist.

And when the criteria for dedicated programs were considered, only the Best-in-Class engaged in 7 or more of the best practices.