1. SaaS
Economics
101
September 2011

2. SaaS:
Software as a Service

3. Unit Economics
Unit Velocity

4. “Be Patient for Growth but
Impatient for Profit”
- Clay Christenson

5. Unit Economics

6. Total Marketing Expense (Programs, Salary, etc.)
+ Total Sales Expense (Commission, Promotions, etc.)
Total Customers Acquired
COCA

7. COCA
COCA is
~$5,000

8. COGS

9. COGS
~$175 per
Customer

10. COGS

11. MRR ~$500 per
Customer

12. MRR

13. COCA Payback
17 Months to be Profitable
on a New Customer

14. This is why Churn is so
Important

15. 7% Churn = 15 Months
5% Churn = 20 Months
3% Churn = 33 Months
2% Churn = 50 Months
1% Churn = 100 Months
17 Month
COCA Payoff

16. LTV
Average MRR
* Gross Margin
/ Churn Rate
Lifetime Total Value

17. Unit Economics
OK but not Great

18. COCA LTV LTV -
COCA
Return $5k LTV:COC
A
A $1,000 $4,000 $3,000 $15,000 4
B $5,000 $10,000 $5,000 $5,000 2
A
B

19. Unit Economics
OK but not Great
3 12

20. Scaling Unit
Economics

21. 1 Customer

22. 1 Sales Rep

23. 2 Sales Rep

24. HubSpot

26. Unit Economics
Unit Velocity

27. UPSELL

28. HubSpot
Source: Goldman Sachs
Public Markets Value Upsell – Why?

29. Hypothesis #1: Unit Economics

30. Hypothesis #1: Unit Economics

31. Hypothesis #2: Growth Imperative

32. Total
MRR
New
Sales
MRR
Churn
Total
MRR
Q1 Q2
Dependent on
Install Base Size
Independent of
Install Base Size

33. Total
MRR
Up-Sell
New
Sales
MRR
Churn
Total
MRR
Q1 Q2
Dependent on
Install Base Size
Independent of
Install Base Size

34. Get existing customers to pay more for
what they’re already using
–E.g. SFDC customers buying more seats
Sell existing customers new products
–E.g. CTCT selling email customers their
survey tools
2 Approaches to Upsell