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A List of SaaS Benchmark Reports & Potential Dangers
Benchmarks can be extremely helpful in guiding decision-making or they can be incredibly dangerous.
Dangers of Benchmarking
There are a few things that concern me when people use benchmarks to make critical decisions:
Context is critical. The more comparable your company profile is to the data set the more meaningful the comparison. It likely is not a good idea to compare yourself to top decile companies in every metric.
Benchmarks are historical looking and don’t reflect recent economic changes.
Look at the big picture. It’s easy to get sucked into metrics and comparisons, but you need to step back and understand your company’s ultimate objective. There is more than one way to get there and looking at a bunch of averages from benchmarks might not be your way.
Data Quality: There are two main considerations:
Inconsistent accounting data for <$15 ARR companies. There is often a huge range of how things are being accounted for at smaller companies which makes some benchmarks less meaningful.
As an example, I frequently hear early-stage companies say that they have world-class gross margins… Yeah, if you don’t add half of the costs that belong in COGS then things will look great :)
Inconsistent definitions: If you have been in the SaaS world for longer than a week then you know that almost every company has its own definitions of SaaS metrics.
One example is how sales commissions are reported. Are people reporting it on a GAAP basis (capitalized and then amortized over time) or on a cash basis? The difference can be huge so unless the survey is specifically asking this question (most don’t) then you might get a mixed bag and a wide range of results.
SaaS Benchmarking Guides
Below is a list of SaaS benchmark report links that I have found useful. The data in these reports vary wildly, so as mentioned above, understand what you are benchmarking against and if the benchmark is comparable to you.
ICONIQ always puts out amazing content and analysis. ICONIQ has a lot of amazing high-growth companies in their portfolio and they include the data sliced in a lot of interesting ways. Also, all of their charts are awesome and make for great discussions.
While the data set is a bit older, I like the framework Bessemer sets up for the success criteria to scale to $100M and beyond. I particularly like the detail around growth endurance which isn’t covered by most benchmarks.
OpenView’s report is particularly interesting for earlier-stage companies as that is where the majority of survey participants sit. Also, given it is a recent survey (released in Q3 2022) they have some interesting insights on how companies are reacting to the new macro environment. And of course, it wouldn’t be OpenView if they didn’t share insights and benchmarks on PLG.
Jamin provides a must-read weekly update on public SaaS company benchmarks and always has insightful commentary on the markets and other topics. If you are private, these benchmarks are interesting to see where you need to eventually be at scale.
RevOps Squared just started putting together SaaS metric benchmarks. They have a pretty large sample size of 878 SaaS companies participating. They also include helpful explanations to help better interpret the results.
KeyBanc has had one of the longest-running SaaS surveys and often provides interesting insights. But TBH, I am not super impressed with the size of their data set. You can take some interesting learnings from it but there is a huge range of companies and the sample size is small.
a16z just released this benchmarking guide in December 2022. There are some interesting things here, but the data is HEAVILY skewed toward hyperscaler companies (top 5-10% of companies) - if that’s you then take a look.
Also, their benchmarks by ARR scale are too wide. Their first bucket is $0-20M and based on the data below seems very skewed to the early-stage companies. So like all benchmarking data, be cautious when reviewing.
Final Thoughts on Benchmarking
If you take away anything from this post, remember that benchmarks can be useful guideposts if used correctly but without careful consideration and review then they can easily lead companies to make bad business decisions.
I admittedly love looking at SaaS metrics because I have no friends. But also because they can help paint a story of a company. Metrics are only useful if I have enough context and information.
Without context then metrics are meaningless.