Benchmarks · SaaS / Subscription
What investors check first in a SaaS startup
Healthy ranges for a SaaS startup at an early stage: gross margin 70%–90%, monthly customers churn up to 3%, year 2 monthly expansion 0%–2%, annual price increase 0%–10%.
How a SaaS startup makes money
Customers x price, minus churn, plus expansion = MRR.
That one line is the revenue engine. Every number in it should be something you can measure today and defend with your own data. Investors rebuild it in their heads in the first five minutes, so your model should too.
The benchmark ranges
| Metric | Healthy (green) | Watch (amber) |
|---|---|---|
| Gross margin | 70%–90% | 60%–95% |
| Monthly customers churn | up to 3% | up to 5% |
| Year 2 monthly expansion | 0%–2% | 0%–4% |
| Annual price increase | 0%–10% | 0%–20% |
Year 2 monthly expansion. 2%/month = ~27%/year net expansion - only with proven upsell.
Annual price increase. Large yearly price rises raise churn risk.
Ranges are rules of thumb for early-stage companies, used by the Model Health Score in the SaaS / Subscription edition. They are not market data; check current sources and talk to founders who raised recently.
The drivers in the model
These are the inputs the SaaS / Subscription edition asks for, with the values used for the sample company, Loopdesk Inc. (B2B customer-support software). Where a value changes over five years, the first and last are shown.
| Driver | Sample | Why it matters |
|---|---|---|
| Customers at start (month 0) | 40 | Paying customers you already have before month 1. |
| Monthly price per customer (ARPA), Year 1 | $400 | Average Revenue Per Account per month. For annual plans, divide the annual price by 12. |
| Annual price increase | 5% | Applied at the start of each new model year. |
| One-time onboarding / setup fee per new customer | $500 | Set to 0 if you do not charge setup fees. |
| Organic / inbound new customers in month 1 | 4 | Word of mouth, SEO, referrals, founder-led sales. |
| Organic new-customer growth per month | 8% → 2% | Compounds monthly. 2-8% is a common range; above 10% needs strong evidence. |
| Paid marketing spend | $8,000 → $110,000 | Ads, sponsorships, paid campaigns (people costs are in Headcount). |
| Paid CAC (cost to win one customer via paid channels) | $2,400 → $3,200 | Paid new customers = paid spend / paid CAC. CAC usually rises as you scale. |
| Monthly customer churn | 3.2% → 1.6% | SMB SaaS often 2-4%, mid-market/enterprise lower. |
| Monthly expansion on existing MRR (upsell) | 0.8% → 1.2% | Upgrades, seats, add-ons as % of opening MRR. |
| Share of MRR billed annually upfront | 30% | Drives deferred revenue (cash collected before it is earned). |
| Average months of prepaid revenue outstanding | 6 | For annual prepay, ~6 months is a fair average balance. |
What the sample model looks like over five years
| Loopdesk Inc. | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|
| Revenue | $456k | $1.36M | $3.25M | $6.45M | $11.1M |
| Gross margin % | 85% | 85% | 86% | 87% | 87% |
| EBITDA | -$557k | -$1.05M | -$691k | $607k | $3.57M |
| Cash at year end | $1.27M | $5.36M | $5.33M | $6.19M | $9.72M |
| Paying customers (year end) | 126 | 342 | 721 | 1,271 | 1,964 |
| ARR (year end) | $639k | $1.85M | $4.22M | $8.02M | $13.3M |
| Headcount (year end) | 9 | 16 | 22 | 28 | 30 |
| LTV : CAC | 4.1x | 4.6x | 6.1x | 8.1x | 10.2x |
| CAC payback (months) | 7.6 | 8.7 | 7.8 | 6.8 | 6.1 |
Fictional sample company, Base case. Figures are illustrative and come from the SAMPLE file of the SaaS / Subscription edition.