We all take it for granted that companies can trade off growth 💹 for profitability 💰. But that’s not really true. Even if that’s what we've seen in public SaaS since 2021, from our data in BenchSights SaaS Metrics.* Growth: 34% to 17% EBITDA: +4% to +16% What I'm wondering is HOW companies have achieved this trade-off?! 🤔 After all, it’s not guaranteed! Watching your growth decline is typically INVOLUNTARY Getting to profitability takes work! You need to get more efficient... invest smarter, cut headcount 🤕! 12% points of EBITDA operating leverage is not a given even when growth goes down 17% points. Of course, each company is different. But we DO have benchmarks for the median savings since 2021: S&M: 6% points savings R&D: 3% points savings G&A: 3% points savings Surprised? 😮 I was!! Here I’ve spent so much energy talking about how GTM efficiency is a mess…. And yet this shows that S&M accounts for HALF the savings. Perhaps it’s not such a mess afterall? Nah..... GTM is still a really big problem. And you shouldn’t get sucked into thinking otherwise. Why? Think about what SaaS is. If things are working, SaaS companies SHOULDN’T have to pay a lot for renewals. And upsells/expansions should be a lot less expensive than new sales. But that’s not happening (or at least there’s a lot of churn counteracting it!). I still come back to the fact that one of the most salient metrics to look at is how much S&M is spent for each $1 of Net New ARR. For public SaaS, it's moved up a lot from $1.24 in 2021, to $2.09 today. With quite a few companies north of $3.00 and even $4.00! Ok... So does that mean we shouldn’t feel good about the 12% points improvement in EBITDA?! Of course not. It's just that at these growth rates, it's not enough. Operating leverage should frankly be a lot higher when you're growing at 17%. #SaaS #GTM #Benchmarks * Benchmarks measured across ~80 public SaaS companies... Margins measured on an LTM basis, backing out stock-based compensation. See link in comments below to participate in the BenchSights SaaS Metrics community, from which this data has been pulled
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