It’s an annual tradition.
At the end of every year, we gather around, talk about the past year’s memories, and make fresh…annual plans.
Yes, it is annual planning season. More than memories, it’s better with data.
That’s why I’m glad there’s another annual tradition—the SaaS Benchmarks Report. Originally created by OpenView Ventures, this annual report has led businesses through the rise of NRR and the shift to remote work, from growth at all costs to efficient growth. And this year, High Alpha is carrying on the tradition.
Based on this report, I recall making major business decisions at previous career stops. It led to conversations between the CFO and CMO. It guided how we went to market, how we fundraised, and how we built teams.
This year’s version is no different. The quality of content can often be judged by whether or not it’s passed around your team’s Slack channels, if quotes are pulled out, data points dropped, and…personally, if I print it. Which I did with this one. Here are my literal highlights from this year’s report.
- The shift from growth at all costs to efficient growth doesn’t mean businesses have stopped growing. It’s not all doom and gloom. In this era of profitability and pinching pennies, it’s easy to think survival first. However, this data shows that businesses are still, in fact, growing. Is it as fast as they have previously? Likely not, but they’re still growing. From $0-$50M in ARR Great (upper quartile) businesses are growing at greater than 50% YoY and Good (median) businesses are growing at a rate of at least 30%.
- You didn’t think we would get through a benchmarks report without AI, did you? 56% of companies have launched or tested AI features in their product. That’s not the statistic that jumped off the page for me, though. More interestingly, 68% of respondents said revenue expansion opportunities drive their AI strategy. Thinking about how AI can help drive new business or reduce costs is easy. But are you thinking about how AI can help expand your existing business?
- Every year in these reports, there’s interesting data and new data points. The new metric that many companies are leaning into this year is ARR per employee. It’s a great snapshot of … everything in the business. The inclusion of this metric alone is interesting to me. Within this section, though, a highlight is that companies with less than $1M in ARR have increased ARR per employee by 255% since 2022. Startups are still starting, growing, and thriving…but with fewer people involved.
- Low cost doesn’t make retention easier. This is an anecdote that I’ve heard previously, but it’s interesting to see the data back it up. Interestingly, the ACV with the highest NRR (113%) is $100-250K. This doesn’t mean you can increase your ACV and expect stickiness. More complex products with higher ACVs are likely to provide more value and create more stakeholders across a business.
- Most businesses include services in at least some of their deals. The Juice has been wrestling with this, as we previously didn’t include services in our base offering. Instead, we were focused on selling them separately. However, with a combination of higher ACVs driving better NRR and only 37% of businesses not including services in some of their deals, we have updated our pricing and packaging to include content production and/or events services. This is the type of strategy that high-quality data in high-quality content can guide.
- In-office businesses grow faster than remote businesses. This is the data point that most jumps out of the report. Nearly every business is considering return-to-office policies, how to make the most of hybrid environments, or continuing in the remote world. This data shows that default in-office businesses have a 50% median YoY Growth Rate vs. only 39% for fully remote teams. Act accordingly.
- The future is bright. Despite … everything … going on in the world, founders are generally more optimistic about their companies than the macroeconomic environment. Perhaps that’s because it’s in their control. Or perhaps, it’s because unwavering optimism is what it takes to be an entrepreneur and founder.
Here’s to an optimistic future and more benchmark reports.
