What is SaaS?
Software as a Service (SaaS) is a delivery model where software is hosted centrally and licensed on a subscription basis. Users access it via the internet.
Key Characteristics
- Cloud-hosted, accessible anywhere
- Subscription pricing (monthly/annual)
- Automatic updates
- Multi-tenant architecture
- No installation required
SaaS Metrics
- MRR/ARR: Monthly/Annual Recurring Revenue
- Churn Rate: Customer loss rate
- Net Revenue Retention: Revenue including expansion
- CAC Payback: Months to recover acquisition cost
SaaS Business Model
Pricing Tiers
- Freemium: Free basic tier
- Self-serve: Online purchase
- Enterprise: Sales-assisted
Growth Levers
- Land and expand
- Upsells and cross-sells
- Reduce churn
- Improve pricing
B2B SaaS Benchmarks
- LTV:CAC > 3:1
- Net Revenue Retention > 100%
- Gross Margins > 70%